One of the big pushes I am seeing right now in the area of Elder Law and Long Term Care is the Irrevocable Trust. So what is it? An irrevocable trust is a trust that you transfer assets (money, etc) into. Once the assets are in the trust, they can no longer be counted as your assets for the purpose of qualifying for Medicaid. This is the “golden ticket” of Medicaid planning right now. But is it a good idea?
Here are my thoughts on it: First, the assets have to be in the trust for 5 years before they can help you as they are subject to the 5 year look-back. So if you put your assets in the Irrevocable Trust today then you had to go into a nursing home a year from now, you are going to have a problem. You will incur a penalty and the State of Michigan won’t pay for your nursing home care for a period of time. You see, the thing about the Irrevocable Trust is that once you put your assets in, you can’t get them back out. So you are pretty stuck.
I have heard of people being told that you can get your assets back out. That is NOT true. The people who are saying that are getting confused with the new Michigan Asset Preservation Trust. Those types of Trusts will not work for Medicaid. They are also telling people that their children can get money out. This is true. However, now you will have to ask your children to take money out of their own inheritance. How is that going to go over? On top of that, do you really want to ask your children every time you need money?
The biggest problem that I have with the Irrevocable Trust is that you lose control over your money. These days there are so many great options for you if you need help. There are many home care agencies, big beautiful new assisted living facilities, senior apartments, senior communities with activities including swimming pools, etc., just to name a few. If you tie all of your money up in an Irrevocable Trust, you won’t have money available to pay for those wonderful things. Who wants to go to a nursing home anyway? Do you? Did you say to yourself, “When I get older, I want to go to a nursing home.” I doubt it. More than likely you said, “Don’t ever put me in a nursing home.” SO WHY PLAN TO GO IN ONE? That’s what you are doing when you put your assets in an Irrevocable Trust. You are sheltering your assets in order to qualify for Medicaid. Sure there is the MI Choice Waiver program where Medicaid will pay for home care, but there are limited slots available, income limits, people coming into your home, etc.
I am not saying that an Irrevocable Trust is not useful in certain situations. But I am saying that companies are trying to push them on people much too often. Whether you are 30 or 85, you want to enjoy your life. Why not do so. Use the money you saved to enjoy the rest of your life – to improve your quality of life. There are a lot of great options out there now for you to do so. Live well!