Q: I want to start looking into creating a trust to protect my assets for Medicaid but the idea is over-whelming, can you explain the process?
A: There are several types of trusts. One type is an irrevocable trust for Medicaid asset protection purposes. This trust will protect certain assets in case they need to apply for government benefits to assist them with their daily activities.
The drafting process of the trust document is vital because it outlines the rules of the trust. Without understanding these rules, the creator of the trust or the trustee may be in jeopardy of making the trust assets vulnerable when the individual is assessed for Medicaid eligibility. The trust will state who the creator of the trust is and who is appointed by that person to serve as trustee of the trust. The document should also include a provision stating that the creator of the trust will not have access to any trust principal. Beyond that, multiple decisions need to be made by the client, in consultation with their attorney. These decisions will include whether or not the creator will have access to income generated from the trust, who will be able to remove a trustee or appoint a successor trustee, if the creator can change the beneficiaries of the trust, and other critical points for the operations of the trust during the creator’s lifetime and after death.
Part of the rules of the trust will include directions as to who will receive the assets at the death of the creator. The distributions may be outright or in a further trust to protect the beneficiary from creditors or from losing government benefits they are receiving.
Once the document is signed by the creator and the trustee(s), the next important step is to fund the trust. This means changing the ownership or title of certain assets to the name of the trust. Trusts are often funded with real property, bank accounts, investment accounts, and savings bonds. The trustee can sell the assets in the trust, collect rents or any other income, and reinvest the assets in alternative ways.
A trust should be reviewed regularly, at least every five years, to make sure the trust rules are being followed and the trust continues to achieve your estate planning goals. You should visit with your estate planning and elder law advisor to create and review these documents.
- Britt Burner, Esq. and Nancy Burner, Esq.