Most people do not want to think about the possibility of spending time in a nursing home. However, a large percentage of the population spend a portion of their life in a long-term care facility and, if they do not plan in advance, they may be thrown into a state of poverty. The average cost of nursing home care for a private room in Texas in 2016 was $5,931 per month or $71,172 per year. A nursing home stay can quickly deplete your assets to the point where Medicaid would pay for your stay. However, most people would prefer to give their hard-earned assets to their children and not spend them on nursing home care. A solution is to create a nursing home protection based plan centered around an irrevocable trust to protect your assets and allow you to become eligible for Medicaid.
Instead of spending your assets on long-term nursing home care, Medicaid will cover the expense. This type of trust is structured in such a way that the assets will not be spent or lost when you go into a nursing home in the future. At the same time, it allows you to manage your assets including all of the income produced by the trust assets through your lifetime.
In order for these trusts to work effectively, they must be set up and funded at least five years before going into a nursing home. You are not permitted to remove assets from the trust and put them back into your name, but you are allowed to make distributions from the trust to your beneficiaries (often an adult child) and they can (among other things) give those assets back to you the same day, all without affecting your Medicaid eligibility.
Justin T. Crain is an estate planning attorney in the Plano, Texas office of Thomas Walters Estate Planning where he provides legal services including Wills, Trusts, Gun Trusts, Guardianship Administration, Probate, Estate Administration, Medicaid Planning and Nursing Home Planning to those in the surrounding areas of North Texas.