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Thursday, October 20, 2016

Long Term Health Care Planning: How To Protect Your Home

It is a well-known fact that nursing care, whether rendered at home or in a nursing facility, is extremely expensive. Even if one possesses substantial assets, those assets will be eroded quickly as a result of spiraling health care costs.  Often, the most significant asset owned by the person needing such care is the family home.  Therefore, it is important to take steps to ensure its protection.

A common method of financing long-term health care costs is the utilization of benefits available under the federally funded Medicaid program.  Unfortunately, in order to qualify for benefits, the value of the assets which you own (including your residence) must be minimal.  Even in those instances where you are permitted to keep your home, the State of New York has the right to place a lien on the property.

While many people transfer their assets in order to become eligible for medicaid, transferring liquid assets, such as savings accounts, stocks, bonds and mutual funds, involves a significant loss of control.  You may be dependent upon such assets in order to maintain your standard of living.  On the other hand, a family home can be transferred to an irrevocable trust, thus protecting it from long-term health care costs, without such an important loss of control. 

A properly drafted irrevocable trust can preserve your home, and at the same time, avoid adverse gift tax and capital gains tax consequences.  It can also provide you with a great deal of flexibility and some degree of control.  For example, the trust can be designed to provide you and your spouse with the right to reside in the home for the remainder of your lives.  If you later decide you want to move, you can require the trustee to sell the home and either buy another home in its place or invest the proceeds of the sale in order to provide you with income.  Lastly, such a trust can provide for disposition of the home upon your death without the necessity of your heirs going through probate.

The sooner a transfer of your residence to a trust is accomplished, the more likely it will be safeguarded.  It appears probable that the laws regarding medicaid eligibility and the transfer of assets will soon become more restrictive.  Of course, before any transfer of assets is accomplished, advice from an attorney practicing in the areas of elder law and estate planning should first be obtained.


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