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Trusts for Mommy and Me

Question: My mother has a trust that protects her house in case she needs long term care in a nursing home. Is this legal? Also, when she dies the trust is paid to another trust for me. Do I need this? I am only 53 and my mother is 75.
December 3, 2020
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Question:  My mother has a trust that protects her house in case she needs long term care in a nursing home.  Is this legal?  Also, when she dies the trust is paid to another trust for me.  Do I need this?  I am only 53 and my mother is 75.

Answer: I assume what you are describing is an Irrevocable Medicaid qualifying trust.  Based upon that assumption, the trust is a very common and effective way to protect assets in case your mother later needs nursing home care or community home care through the Medicaid program.  The benefit of the trust is that your mother continues to live in the home, pay all the real estate taxes and expenses but after five years, if she needs Chronic Care Medicaid in a nursing home setting, then the house is fully protected.

For the rest of 2021, if she needs community care at home the house is protected immediately, there is no five year look back.  However, Medicaid law changed in October 2020, a major impact being the implementation of a 30 month look back period for Community Medicaid. If your mom lives in the home and needs community care, the house has a certain amount of protection.  While she is alive, there can be no lien placed on the home.  However, upon her death, Medicaid is a “super creditor” in her probate estate unless she is survived by a spouse or disabled child. The trust also preserves her Star exemption and/or Veterans Exemption- which are reductions in her real estate taxes.  In terms of long-terming planning, protecting the homestead in an Irrevocable Trust makes sense.

With respect to the trust for you, I am assuming the trust you describe protects you in case you later need long term care.  When a third-party (your mother) leaves you an asset in a properly drawn descendants trust, you get all the use and enjoyment of the property and yet, if you later need care, the assets is protected.  You may one day sell the property and invest the proceeds.  Regardless of what assets are in the trust, they are protected from the cost of care.  If your mother lives another twenty years (which is entirely possible- as people are living well into their 90’s) then you will be 73 when she dies.  Whatever is in the trust created by your mother will be protected not only from the cost of long-term care but also from distributions to divorcing spouses and general creditors.  The beauty of this planning device is that you can take all the money out of the trust at any given time, if you choose to do so.  The trust protects you from others but deprives you of nothing.