Many people believe that having a Will is all they need, and they don’t need an estate plan. Over the years we have worked with many families who only had a Will, and no provisions for needing care in a nursing home. As a result, the healthy spouse’s financial security was neglected and the family went broke.

Many of my clients who want to protect assets from long term care costs, own their houses in an asset protection trust. These are the top 6 reasons why our clients decide to use this trust…

• While your parents or grandparents didn’t have an asset protection trust, they didn’t often need long term care. 

They likely had family members nearby caring for them.

Statistically speaking, your odds of needing long term care are increasing. Estimates point to two out of three people who will need long term care in nursing homes in their 80’s. Nursing homes currently cost $15,000 a month, and they will cost even more 20 years from now. Asset protection is important, to avoid losing everything to long term care costs.

• Estate planning is not just about answering the question of who gets your stuff when you pass away. 

It’s also about planning for what happens if you get really sick. We’ve all been paying into this government system with the promise that when we turn 65, we will have healthcare. Unfortunately Medicare doesn’t pay for the single biggest health care expense that seniors face, which is custodial long term care in a nursing home.

If your health issue is acute, such as a heart attack, or you need surgery, or have cancer, and require acute care in hospital, Medicare will cover the costs of treatment. Whether my spouse and I are financially secure in our retirement years, depends on the healthcare issue either of us will have. This is often beyond our control, but what we can do is to prepare for all eventualities, by protecting our house with a trust. 

• Medicaid is the only government payment source for long term care, but the rules are broken. 

If you’re a single person going to a nursing home, you’re allowed to own up to $8,000 of assets, a house and car. A couple with $100,000 in a retirement account, must spend that money on care in the nursing home. Once the money is gone you can apply for Medicaid benefits. However, your monthly income is used to pay for care, and you are only allowed to keep $45 a month for all your personal needs. We have a situation where seniors are going broke before they get Medicaid benefits. They’re allowed to own a house but if they have no money, they cannot pay property taxes, utility bills or maintenance costs.

Assuming your child is a power of attorney, they may sell your house to avoid paying the taxes and bills. However, this means you will now have cash which will result in you losing your Medicaid benefits. Not only do you lose your house, but you will need to spend the money on care. When you are broke, you are eligible for Medicaid benefits again. It is not obvious in the Medicaid rules that you will lose the house. The problem is that it becomes financially impossible to keep the house. Putting your house in a trust will protect it from being lost to Nursing home costs.

• If the house is left to your child in your Will, by paying the taxes and keeping the house, does not guarantee that they won’t lose the house. 

When somebody who passes away was on Medicaid, the executor is forced to sell the house. The proceeds are used to pay the state for the care the senior received in the nursing home. This is known as the Estate Recovery Program, and the claim in Pennsylvania is limited to someone’s probate estate. This means that if the assets go through the Will, it will be a probate case, and the state will have a claim against the house.

If your house is in the asset protection trust when you pass away, the state can’t get your house while it’s in the trust. Your kids will inherit the house if you go to a nursing home, or you pass away.

• Your kids will receive their inheritance faster if your house in an asset protection trust.

We don’t have to wait 12 months to make the distribution of the inheritance to the children. The distribution process usually happens after four to five months. This is because we don’t have to pay creditors. Usually, in probate cases, creditors can make a claim a year after the person has passed away. Once the creditors are paid, distributions are made to the heirs.

• When your house is in an asset protection trust, the only thing you would have to give up is having access to the home equity. 

However, if you have money in the bank, you won’t need home equity. Giving up access to the equity, means the nursing home can’t access it either. You have protected your house, so you won’t lose it. If you or your spouse need long term care, the healthy spouse can still live at home.

There are opportunities to protect yourself, and that’s what we teach you at our Three Secrets Workshop. If you want to protect your assets, and you want the best plan for your family, we can help you! After attending our Three Secrets Workshop, most of our clients have participated in our Blueprint Workshop. As a result, many of our clients chose to work with us and put their houses into a trust.

Register to attend one of our upcoming free workshops. We will teach you about the estate planning tools you can use to do some good planning. Visit sechlerlawfirm.com/workshops