One of the most repeated questions asked of me in client meetings is “Will a revocable trust protect assets from the nursing home and Medicaid?”

Misinformation and myths run rampant in the Medicaid Planning world. Many of the families I speak with say the main reason they set up their revocable living trust was that they were told at a dinner seminar that it would protect their life savings from long-term care costs such as assisted living and nursing homes.

Unfortunately for these folks, the answer to “Does a revocable trust protect assets” is No! A revocable living trust does not protect your savings from the cost of a nursing home! Please make sure your loved ones are not letting their current planning documents gather dust thinking all is well when they may fall victim to this unfortunate misconception.

Revocable Living Trusts are not asset protection vehicles, because the creator (“grantor” or “trustmaker”) reserves the right to change the document, to be the person in charge of the money (“trustee”), and reserves the right to access all the money or assets within the trust (“beneficiary”). When a person or couple fills all three of these roles and has the right to spend or transfer the assets within the revocable trust, that person or couple has full control…and when you have full control, you don’t have asset protection.

Think of a revocable living trust as a safe with the door broken wide open. You can put money or real estate inside and take the money or real estate out. You have full access to what is in the trust, and have full control over what happens to it. Should you need nursing home care in the future, Medicaid will expect you to take some money out of the open safe in order to pay your monthly nursing home bill, which makes sense, because you have full access to it – it is yours.

Only an Irrevocable Trust specifically designed for Medicaid planning purposes protect your assets. These specially designed trusts are like a safe as well…but the door is locked. Since you cannot reach in and take the money out, you do not have full access. Only the trustee that you choose (usually a child or other trusted family member or friend) has the power to deal with trust assets. Since you are not considered the owner of the irrevocable trust and are not the trustee, if done correctly you have gained asset protection.
 
Caveat: Please see our posts on the “Medicaid Lookback Period“. Simply placing assets in an irrevocable trust is not a cure-all and can actually disqualify a Medicaid applicant from receiving benefits for many, many months if not done correctly. There are significant matters of timing to consider and we recommend you seek out the guidance of an Elder Law attorney before proceeding.

Would you like to create an irrevocable Medicaid asset protection trust? Russell C. Golowin is an Elder Law and Estate Planning Attorney that can help you protect your savings and ensure your receive proper long-term care. Call (614) 453-5208 to schedule an in-person meeting or Zoom conference. For more information, visit the Golowin Legal Medicaid Planning page.

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