Attorney Thomas B. Burton discusses how to protect your home from the nursing home in the state of Wisconsin. Attorney Burton discusses the rules regarding Medicaid qualification and the Medicaid lookback period and also discusses what type of trusts are effective for Medicaid asset recovery protection and which trusts are not effective. This educational video is designed to educate and empower you so that you can take charge of your own estate planning and personal affairs.
Want to learn more about how Irrevocable Trusts work for Medicaid Asset Protection? Get your Free copy of Attorney Thomas B. Burton's 5-Step Guide on How to Protect Your Home From the Nursing Home.
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Welcome back, I'm Attorney Thomas Burton and today's topic is How to Protect Your Home from the Nursing Home.
Now, for those of you new to the channel, I'm an estate planning and asset protection attorney here in Wisconsin and I make these educational videos to help people and empower them to take charge of their own estate planning and in my estate planning practice, this is one of the most common questions I get asked by people in their later years, in their 60s to 70s and above, is this concern about long-term care costs.
So today, with the yellow legal pad, we're going to go through how to protect your home from the nursing home and as a little background, the strategies discussed today are going to work here in Wisconsin but if you're watching in another state, you should definitely check with an attorney licensed in your state for the specifics because although the Medicaid program is federal law, how it's implemented is at the state level and so from state to state, there can vary, the implementation of these rules depending where the state is at in their system but in general, the information today from what I've told by attorneys in other states, works in other states but it may need its own adjustments in the state you're residing in. So this video today is specific to Wisconsin and where we sit in terms of Medicaid and asset protection.
So as I have mentioned, how to protect your home from the nursing home, this is a common question I get because for many people their home is one of their largest assets and it's something they've often worked most of their life to try to pay off and if they're in their 60s or later, they maybe have a paid off home and they would like to leave it to their children as an inheritance, a legacy and it can be, maybe not just the home, maybe it's the farm, the home with the farm, things like that and I understand that the home often has a lot of sentimental attachment as well and people are concerned about losing their home if they need to go into the nursing home.
So without getting into the full scheme of Medicaid qualification, there's two parts to Medicaid - you have to be age 65+ and then you have to qualify based on assets and income and then there's the part about what happens if you do qualify, when you pass away, Medicaid seeks to get repaid from your estate for the funds they expended.
So the strategy I'm going to talk about today can help you both qualify for Medicaid, quicker and can help you not have to get repaid from your home after you pass away.
So today, here's my little schematic, we have your home and what we need to do, if you want to protect the home from the nursing home, we create what's called an Irrevocable Trust. Irrevocable means it's not changeable after you set it up like you'll often hear me talk about using revocable trust in my estate planning practice and this is the most common type of trust folks use as what we call a Will Substitute and revocable means changeable or amendable. Irrevocable means it cannot be changed after you set it up meaning you have to have in your mind fix the beneficiaries you want to receive the asset. So as I have mentioned, people often think about this in their 60s and later and if they know their children and who they wanted to go to, they can do this type of planning.
So we set up an irrevocable trust with the help of an attorney and you're going to need to name a relative or friend as trustee of this trust and I like to name a Successor Trustee. So for this type of trust, you cannot serve as the trustee, you need to have a third party serving as a trustee to manage the asset and then once the trust is set up and signed, we're going to use a deed and deed the home from your name into the name of your irrevocable trust and the trust will contain the rules saying that the home, the assets are to be held during your lifetime for your use but they aren't available to you, the principle of the trust is not available to you during your lifetime and that's the key to protect those assets from Medicaid payback.
Then, so what you want to do is set up the trust and execute the deed. The date of the deed is going to be key because that will start what they call, what we call the Five-Year Look-Back Period, five years or sixty months is what Medicaid looks back for any asset or transfer titles or any gifts for less than value. So you cannot wait until your deathbed to do this type of planning, you must do it in advance and Medicaid knows this that people, if they could, they would try to just give away assets right before they need the nursing home or transfer them and then, so they've implemented this look back period to say if you're going to do this, you have to do it well in advance and several years ago, the look back was three years, it's currently five years and I've told clients, I won't be surprised if it becomes longer in the future because the government expends significant funds on the Medicaid program but current law, it's five years. So you need to engage in this type of planning at least five years or sixty months in advance. Then if you get past the five year look back period, the house is out of your name, so it won't count as an asset against you for Medicaid qualification which generally it would not anyway because a house is exempt for Medicaid qualification but where it comes into play is after you pass, Medicaid might allow you to get on Medicaid but they will put a lien against the home for the value they paid and seek to get repaid after you pass. So the key here is if the home is in the irrevocable trust, there's no Medicaid repayment after you pass.
Now you may have heard about other techniques that people have done with deeds and life estates and things and just be aware, Wisconsin changed the rules in 2014, August 1, 2014, where they adopted what they call Expanded Estate Recovery meaning they will go after assets that pass outside the probate process. Before that, they were only looking at assets that went through probate court. So now, simply avoiding probate on your assets isn't enough to avoid the Medicaid payback but we still have the irrevocable trust method, we can use to provide that Medicaid and nursing home asset protection.
Now a few points about the trust during your life and today, we can use these trusts for various assets, today I am focusing on the home because this is the most common question I get asked and one, people are concerned about.
So during your life, the assets in the irrevocable trust, the trustee can manage the real estate and they can buy, sell or exchange real estate on behalf of the trust. So sometimes folks ask me "I like my current house but what if I want to move down the road to another house?". Well commonly, the trustee has the power to buy, sell or exchange real estate inside of the trust, so they could sell one house and buy a different house that you move to, let's say, you want to downsize but it all has to remain inside the trust meaning the deed would go from the trust to the buyer and then the deed, they would buy the new house in the name of the irrevocable trust and any cash difference, if there was any difference between the price, needs to stay inside the trust to have that Medicaid asset protection. So if you're engaging in this type of planning, you want to make sure you have sufficient assets outside the trust for your care and often why people look at doing this, I mean for your daily needs and living, often why people look at doing this is the house is what we call a Non-productive Asset, it's something you live in but it usually doesn't throw off income to you but it has significant value, whatever is trapped in the house, a hundred fifty thousand, two hundred, three hundred thousand and that's a way you can protect a large amount of principal of your estate and still use the real estate. So the key is if they buy and sell a house, this is the second most question I get asked, what if I need a different house, the funds must remain in the trust and be used for the purchase of house B. So during your life, the house is held in the trust then after your death, the trust can be set up however you want to distribute the assets to the heirs you choose. So in this scenario, we have three children, it could split equally among the three children and for a lot of folks, they sell the house and then distribute the proceeds equally to the children. The upside is, the house would avoid probate, so no probate court costs and fees and it would also avoid the Medicaid payback, if you should need to go on Medicaid long-term care assistance instead of paying back Medicaid, that eight to nine thousand dollars a month. Eight to nine thousand is the average cost of a private pay nursing home room in Wisconsin instead of that lien going up every month, let's say it's seven or eight thousand, eight thousand a month instead of and let's say you're in the nursing home 12 months instead of paying $96,000 back to Medicaid, there's no Medicaid payback and it can distribute equally to the children. So this is one form of asset protection and no one is sure if they will need Medicaid or long-term care or how long it will last. Now if you're young enough, I always suggest you look into long-term care insurance and those type of financial products. They often make sense to get quotes in your 40s or 50s, the younger you are, the healthier you are, you'll get better rates and if you have significant assets, you can buy the long-term care insurance and provide for ways to get care at home, things like that but some of my clients either have a health issue that prevents them from purchasing the insurance or they're already of an advanced age, where the cost becomes prohibitive. They can't afford the premium on that insurance every month.
So using the trust then, it protects the assets during your life from creditors, divorce and lawsuits. So as an example, sometimes people say, "I just want to deed the home over to my children but unfortunately, using that method is where you see those stories sometimes about parents who did that and then one of the children kicks them out of their own home either because they had a disagreement with the child or let's say the child has creditor issues, money problems and suddenly the house becomes a asset a creditor is going after. That's the problem with putting the home in the child's name before you pass. Sometimes it's not even your own child's fault but let's just say they were in a car accident, a big car accident and there's a lawsuit and the creditors are suing everyone involved. Well if your child's name is already on your house, I can tell you creditors are quite sophisticated and it's not hard for them to do a real estate search and see that your entirely paid for home is in the child's name, that's a big asset to put a lien against,. So I don't suggest putting their names on the real estate during your life, better to do it after death and that's where the irrevocable trust can hold it for you and pass it to the children upon death and often the children aren't actually going to go on the deed, if they sell the home. They will just get the cash distribution.
So after death then we have no Medicaid or nursing home payback, if the trust is set up properly. Now the ideal age sometimes people ask when to look at this, I would say into your 60s, you want to start looking at it, maybe 65 is a good age depends on your health and family history. So in your 60s, you would want to start looking at this type of planning. Why - you can't qualify for Medicaid until your age 65 plus and we have the five year look back period, so if you look at it let's say, at age 65 and you start the planning then by age 70, you could be past the look back period meaning the house would be safe and I feel this is an ideal age to think about these issues and and talk about them with an adult child or someone you want to name as trustee. So if you're watching this video, wondering, should I look at it now or when, I would say, if you're in your mid 60s, that's the time to talk about it with your lawyer.
Now the other issue I see is, if clients wait too long until their 80s or 90s and then they come in and talk to me about it, I'm very frank with them and I explain the five-year look back and I leave it up to them whether they think they have the time to get past the five-year look-back period.
Now, if you don't have time, there's other strategies we can engage in emergency Medicaid planning and I suggest you discuss those with your attorney but we don't always have as many tools in our toolbox such as this one for the five year look back period, if you don't have the time.
So if you're the type of person who likes to self-educate and that's great, I congratulate you on watching this video today but if you have either you or a friend or relative is in this situation and you're thinking about what each they should think about it, I would say look at it in your mid 60s and also of course, look at the long-term care insurance, get a quote on that, run the numbers, see if you could get that insurance and what makes sense for you but also consider doing this while you're young and healthy and have a sound mind to think about doing all this planning because the older you get and if you have health problems, it can be difficult to deal with these issues and that's why many people unfortunately never get it done.
So I hope this video has been helpful to you, learning more about how to protect your home from the nursing home and again I make these videos as educational content to try to help people out there who are searching for answers. So if it has been helpful to you, please consider giving it a Like, so other people can see and benefit from this information as well.
Thanks for watching and we'll see you next time.
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