There are a variety of trusts that are used in the field of estate planning, and they serve different purposes. In this post we will look at revocable living trusts and Medicaid trusts, and we will explain the differences between them.
Revocable Living Trusts
Revocable living trusts are popular among people who want to avoid probate. This is a legal process that comes into play if you maintain sole and direct personal possession of your assets through to the time of your death. If you execute a last will, the executor must admit the will to probate before the heirs receive their inheritances.
Probate can be time-consuming, and there are expenses that are typically incurred that reduce the value of the estate while the process is underway.
If you use a revocable living trust to facilitate future asset transfers, you are referred to as the grantor of the trust. The grantor can act as the trustee and the beneficiary initially, so you do not lose control of assets that you convey into a revocable living trust.
Because the trust is revocable, you can revoke or rescind the trust at any time that it would no longer exist.
When you create the trust agreement you name a successor trustee and successor beneficiaries. After you die, the successor trustee can distribute assets to the beneficiaries outside of probate.
Many seniors seek Medicaid eligibility late in their lives, because Medicare will not pay for long-term care. Most elders will eventually need assistance with their day-to-day needs, so this is something that is relevant to everyone.
Medicaid is a need-based program, so people who were never financially needy typically engage in something called a Medicaid spend down. This is somewhat self-explanatory: you spend or give away assets until you have very little left in your own name if and when you apply for Medicaid coverage.
You could give your children their inheritances in advance in a direct manner when you are spending down, but you have another option. It would be possible to create and fund a Medicaid trust. A Medicaid trust is an irrevocable trust. Because you cannot revoke the trust, assets that have been conveyed into the trust would not be counted when Medicaid is determining your eligibility.
On the other hand, a revocable living trust would not be good for Medicaid planning purposes, because you do in fact retain direct control of the assets that have been conveyed into the trust.
Free Report on Medicaid Planning
If you would like to learn more about Medicaid trusts, download our special report on Medicaid planning. The report is being offered free of charge at the present time, and you can obtain access to your copy through this link: Medicaid Planning Report.
Parman & Easterday
- Why You May Need a Trust Instead of a Simple Will - December 7, 2023
- Elder Law Answers: Government Benefits for Seniors - December 5, 2023
- Will Your Second Home Go Through Ancillary Probate? - November 30, 2023