An Irrevocable Trust Can Protect Your Money

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By: Bill Henry
PublishedMar 25, 2021
4 minute read

Older people and those living with a long-term illness face the need for nursing home care toward the end of their lives. Sadly, too many elderly individuals live with the fear that they’ll lose their home and estate in order to pay for long-term care. Our Estate Planning & Elder Law Team wants to get out the word about the irrevocable trust.

An Irrevocable Trust Protects Your Home

If you have a long-term illness that may require nursing home care in the future, Robinson & Henry Elder Law Attorney Bill Henry says an irrevocable trust could benefit you and your loved ones.

The elder law attorneys at Robinson & Henry can help you set up an irrevocable trust to preserve your assets for your partner and other loved ones.

Have Questions About Trusts?

Schedule a case assessment when you call 303-688-0944 or click here to set up your meeting online.

Protect Your Money with an Irrevocable Trust

Many older Coloradans worry about when they should create an irrevocable trust. They want to know if it will protect their assets from a nursing home if they need long-term care.

These are great questions, and we’ll dig into them in this article a bit because, as you probably know, the law is always more complicated than it seems.

A Closer Look at the Irrevocable Trust

No one can predict what the future holds. You or your spouse could be diagnosed with some sort of a long-term illness, like Parkinson’s, Multiple Sclerosis, or Alzheimer’s disease. It’s unlikely you will fully recover from any of these conditions. So you or your partner will need long-term care down the line.

If this is the case for you or your loved one, it’s time to think about putting your money in an irrevocable trust.

Know What Questions to Ask Before You Take Action

There are drawbacks to an irrevocable trust that may not be obvious at the outset. The first thing that surprises many clients is the meaning of irrevocable. Irrevocable really means you can’t change it. Once your properties and assets are placed inside of the irrevocable trust, they are there to stay.

A Safe with No Key

Think of an irrevocable trust this way: You put your money in a safe or safe deposit box, and then you lose the key to the lock or you forget the combination to open the lock. So your money is there, but not readily available.

Once the irrevocable trust is created, it’s done. There’s no way to change its terms.

You Cannot be the Beneficiary

Creating an irrevocable trust is almost like giving your money away because you can no longer access it.

In your case, the goal of the irrevocable trust is to protect your house and other assets from Medicaid.

Eventually, Medicaid will no longer take any interest in the money you placed in your irrevocable trust. How long does that take? Five years.

Five years is a long time, but your patience will pay off when Medicaid does not count that money against you or your estate.

Other Ways the Trust Helps

Creditor Protection

The asset protection offered by this particular trust allows you to hold on to your money rather than giving it away.

This kind of trust also provides a lot of protection for your beneficiaries. Not only is the money eventually protected from Medicaid, but it is also protected from your beneficiary’s creditors.

Let’s say your children are named beneficiaries of your irrevocable trust. So, for example, your kids get into a car accident and are sued as a result. No one can raid the trust to take money from your child.

Don’t Wait Too Long

If you’re considering creating an irrevocable trust to protect your assets from the nursing home, we recommend planning sooner versus later given the five-year Medicaid look-back period.

Every situation is unique, but most people typically begin the process in their 60’s or 70’s. You can no longer access the principal once you put the property in the trust. There are ways to reach the income, but they are not generally recommended.

The benefit of an irrevocable trust is to protect your assets from paying for nursing home care. You name your kids as the trust’s beneficiaries, and you get asset protection for your kids.

2021 Colorado Medicaid Planning

Did you know it will cost more than $105,000 this year for someone to be cared for in a Colorado nursing facility?

Most people cannot afford to pay for such an expense out of pocket. Even people who have saved and planned for retirement and their long-term care have trouble meeting this cost. Individuals with low incomes or high medical bills relative to their income and assets can receive the nursing facility care they need through Medicaid assistance.

Medicaid Income Eligibility Requirements

Individuals and couples who anticipate needing long-term care – and help to pay for it – could really benefit from Medicaid planning. There are strict income and asset Medicaid eligibility rules that can disqualify people for assistance for months or years.

These rules change annually, and they are specific to each state. Download Colorado’s 2021 Medicaid income rules.

Do Not Hide Assets from Medicaid

Robinson & Henry Founding Partner Bill Henry, who specializes in estate planning and elder law, offered some terrific insight on hiding assets back in the summer of 2020.

Check out the article and video here. Bill discusses the consequences of hiding assets or even helping people hide assets from Medicaid.

Medicaid Crisis Planning

Everyone will not have the opportunity to plan in advance. And some people, unfortunately, receive bad advice about how to qualify for Medicaid assistance. In either instance, you can still plan and possibly save some remaining assets.

As you can imagine, Medicaid crisis planning tends to be more complex with fewer options. However, a knowledgeable elder law attorney will have strategies that can help individuals and couples facing a critical financial situation.

Let’s Discuss How a Trust Can Help You

If you would like to know more about irrevocable trusts, estate planning, or elder law, set up some time to talk with a member of our Estate Planning & Elder Law Team. They’ll be able to discuss your particular circumstances.

Call 303-688-0944 to schedule a initial assessment. You can also schedule yourself online when you click here.

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