In the field of estate planning there are numerous different types of trusts that can be utilized. There is no one-size-fits-all trust. If a trust is called for, the optimal choice will depend on the circumstances.
Revocable Living Trusts
The revocable living trust is a commonly utilized estate planning device. This type of trust can be revoked or rescinded. You could dissolve the trust, and you could walk away in direct personal possession of the property that had been conveyed into it.
As the creator of the trust you are referred to as the grantor. The grantor of a revocable living trust can act as the beneficiary and the trustee at first. You would name successors to assume these roles after you die.
Since you can revoke the trust and control its assets while it is in place, you are retaining incidents of ownership. Because of this, assets that are being held in a revocable living trust would be counted by the Medicaid program if you are were to seek eligibility.
Many elders who need long-term care do attempt to obtain Medicaid eligibility, because Medicare will not pay for living assistance.
Revocable living trusts are not useful for Medicaid planning purposes. A revocable living trust can provide a solution if you are looking for a way to facilitate asset transfers outside of the legal process of probate.
If you use a last will to arrange for the transfer of your assets, the estate must be probated before the heirs receive their inheritances. This can be a time-consuming and expensive process.
The major difference between a Medicaid trust and a revocable living trust would be the fact that a Medicaid trust is not revocable. A Medicaid trust is an irrevocable trust.
Generally speaking, you cannot change the terms of an irrevocable trust.
With an irrevocable trust you no longer have direct control of the assets, so you are surrendering incidents of ownership. As a result, assets that have been conveyed into an irrevocable trust would not be counted by the Medicaid program.
Though you cannot control the principal when you create a Medicaid trust, you could create an income-only Medicaid trust. With this type of trust you could receive income from the earnings of the trust, but the principal would not be counted by Medicaid program evaluators.
Medicaid Planning Consultation
If you would like some in-depth information about Medicaid planning, we would be glad to assist you. Our firm offers free consultations to people in the greater Davenport, Bettendorf, and Quad City area, and you can request an appointment through our contact page.