Can a Nursing Home Take Your House If It Is in a Trust?

Today’s prices for nursing home care are through the roof. Before long, a lifetime’s worth of savings can be completely depleted. And that’s just for the average person. If you’re a HNWI or UHNWI, the stakes are even higher because you’ve got a lot more to lose financially speaking.

As financial experts who understand your concerns, Dominion has built a reputation on protecting our clients’ wealth – high-net-worth people and families like you who need superior asset protection. It starts with having the right knowledge and insight into scenarios like nursing home care and knowing where your wealth is potentially vulnerable.

More to the point, what if your assets, specifically, your home, is in a trust? Can a nursing home wind up taking it? This question comes up among Medicaid recipients since Medicaid can claim assets from an estate when a beneficiary passes away. It’s a harrowing thought, but we need to examine the details to make sure you have the facts.

Nursing Homes and Insurance

Nursing homes are businesses. And like any business they are entitled to receive payment for the services they offer. When people can’t afford to pay the increasing fees any longer, nursing homes turn to Medicaid.

It’s true that Medicaid is a prime source of funding for long term care, but it’s not without conditions. In fact, Medicaid can seize property of the deceased beneficiary in order to cover the expenses of care. This includes your house, which is classified as a valuable part of your wealth.

Without full knowledge of the specifics of Medicaid and how it may affect your future, it is unlikely that anyone would go into the process willing to fork over their home if things turn sour. So the next order of business is to find out how to make sure your life’s work doesn’t end up financing a nursing home.

Is a Trust the Instrument You’re Looking For?

Trusts are sometimes thought to be mysterious and only available to the world’s wealthiest people. While that’s not the case, it is true that HNWIs can benefit greatly from trusts. So, how exactly does a trust work?

It’s easiest to describe a trust as a legal agreement. In this agreement, a trustee manages property on behalf of designated individuals. For all intents and purposes, it’s a vault for your assets, one that keeps your wealth safe from outside influences. But not all trusts are the same in how they provide this protection.

Revocable Trusts

You can change or even cancel this trust, which makes revocable trusts quite flexible in terms of use. But this flexibility has its disadvantages. Assets placed in a revocable trust are still considered your property; they can be seized by your creditors and, indeed, nursing homes. 

Irrevocable Trusts

On the other hand, irrevocable trusts form the basis of strong asset protection strategies. To pass assets into an irrevocable trust, you surrender ownership and management rights.

This final move distinguishes the assets from your private property, and therefore shield them from any possible creditors. It is a business tactic that is used to protect the wealth in order to maintain it and use it as planned. 

But timing is everything. Medicaid, the program that pays for many of the services of long term care, has what is known as a look-back period. At the moment, this period is five years, and it evaluates any transfer of assets made before applying for Medicaid benefits.

If Medicaid believes that assets were shifted to avoid payment for care, it has the authority to penalize by denying your access to Medicaid for a period of time. That means the creation and transfer of assets to an irrevocable trust before one requires the services of a long-term care facility is vital.

This is because the assets will be protected at the times you require them most without making you ineligible for Medicaid assistance. It is a very fine line, and one that can only be managed properly by those with the knowledge of how to do so. That’s why you need Dominion in your corner to make sure you get the care you need and deserve.

What’s the Right Trust for You?

The topic of trusts is a complex one, and you’re likely wondering how in the world you’re to determine the best one for your needs. At Dominion, we know that every single client is different, and we approach each case with the understanding that all wealth requires a unique plan.

So, we need to examine the various trust instruments at your disposal to help you make the right call.

Asset Protection Trusts

These are the basics of our practice at Dominion, defensive barriers created to keep your money far from the reach of your creditors, the legal system, and other unforeseen events.

But this is where the catch lies; not all asset protection trusts are the same. They can be commended for detailed drafting and for locating such vehicles in relatively secure jurisdictions. We take advantage of the international presence to pinpoint the best spots for the storage and protection of your property. 

Joint Trusts

To those people who want to harmonize their financial objectives with those of their partner, joint trusts will be a valuable tool. This is because they offer an easy and efficient way of managing an estate for couples especially when it comes to the transfer of wealth.

However, this approach demands total trust and agreement on objectives. In case of complicated family structure or more complicated financial plans, different options would have to be considered. 

Insurance Trusts

Such trusts are a great way of avoiding estate taxes on insurance receipts. Since insurance policies form part of an estate, placing your insurance policy within a trust means that more of the proceeds will be received by your loved ones and not be held back by taxes. It is a good decision that helps you protect your assets for future generations. 

Testamentary Trusts

Trusts such as these kick into action when you die, as per your will. The job of this trust is to bestow power to control the management of assets. That way, you can rest assured that your desires will be followed long after you’re gone.

However, they do not protect your property from probate, a legal and very public process. If privacy is of concern, there are other options that can be used for trust. 

Spendthrift Trusts

Want to avoid the possibilities of beneficiaries wasting their inheritance? Spendthrift trusts are the solution to this problem. They give out money in portions and not at once hence encouraging the appropriate use of the money as well as protecting your wealth. 

Credit Shelter Trusts

To the HNWIs, the avoidance of estate taxes is of paramount importance. Credit shelter trusts provide excellent mechanisms for reducing or erasing these taxes and protecting your assets for your beneficiaries. They also give other advantages to the surviving spouses to guarantee their monetary support.

What’s Your Alternative?

Although trusts are one of the most popular tools for shielding assets, they are not the only way to go. At Dominion, we think it’s never enough to merely protect your assets; that’s why we look for every possible way.

People may consider investing in long-term care insurance to help pay for the very high cost of nursing home care. By paying these expenses directly, it minimizes your dependence on personal property, for instance, your house. But to get this coverage, one has to have vision and financial muscle power to purchase the premiums which are not cheap.

Another possible way of going about it is through life estates. This structure enables you to sell your house but still get to live in it until you die. Your designated beneficiaries inherit the property without going through probate and without being liable for nursing home claims after you die. Still, the life estates raise various legal and tax issues that have to be disclosed.

Choosing the best option for your needs isn’t as easy as it sounds; this is where your vision and situational information help. Please use caution in tackling this decision on your own, as it’s one that should be made with the expert assistance of Dominion.

We have great knowledge to help you evaluate the advantages and disadvantages of every decision and develop a unique strategy for your circumstances.

Let’s Find the Best Solution to Protect Your Wealth

Preventing the loss of your assets demands a strategic approach, one that’s carefully designed down to the last detail and implemented without a single error.

As leaders in this field, Dominion remains fully focused on designing an almost impregnable asset protection strategy for high-net-worth individuals based in various parts of the world.

If that’s you, we can help. We’ll set up a discussion to go over your individual circumstances, identify your risks, and craft a personalized strategy that guarantees your money stays with you and your heirs today and for the future. Because your legacy deserves nothing but the very best.