A Trust Is Often the Best Way to Keep Your Home
Trusts are legal structures often used by Elder Law attorneys to preserve income or assets that you would otherwise be forced to spend on your care. Trusts can be an excellent way to protect your home and preserve your equity from being exposed to Medicaid liens when you no longer live there, or estate recovery.
As an example, consider you own a house, condominium or cooperative apartment worth $500,000 in today's market. You bought it 40 years ago for $35,000, and your mortgage is paid off. Now you need long-term home care. Your primary residence is an exempt asset for eligibility purposes; however, Medicaid may eventually require that the equity be used to reimburse the cost of your care. They'll do that by placing a lien against your property when you move out permanently or by recovering from your estate when you die. The lien will be equal to the costs that Medicaid incurred for the benefits provided on your behalf.
Long-term care is incredibly expensive. It may only take a short time for the costs to reach an amount that would exhaust the equity in your home should a lien be enforced. That would mean that your home equity would be left to the government to repay the cost of your care instead of eventually going to your children or other loved ones. A trust can be used to prevent these unfortunate outcomes. By transferring your home to a trust, you are no longer the legal owner of the home. The home is therefore not subject to a Medicaid lien, or the claims of any other future creditors. The trust can be structured to allow you to live in your home as long as you wish and then transfer ownership to your designated beneficiary after you pass. Keep in mind, if you should require nursing home care within the ensuing five years, the home transfer will be subject to the look back period and could result in a period of Medicaid ineligibility. In this event, other strategies may be available to protect a substantial portion of your home equity.