Follow
Share

Hi. We have an interesting situation regarding elder care for my father. About 6 years ago, he went into an assisted living facility (he did not need much care at that point - just some dressing assistance). At the time, costs were reasonable ($3500/month) and he had a good Long Term Care policy. An elder care lawyer recommend he put about 80% of his assets in an Irrevocable Income Only Medicaid Compliant asset protection Trust. My dad went through with this plan. Well, 3 years ago, he had to move to a higher level of care assisted living facility ($7500 / month) and his LTC policy is now exhausted. In 2 years, he will be out of personal assets. I'm worried that the lawyer's plan isn't working as expected. She seemed to have anticipated him staying in the cheaper facility for much longer and then going to a Medicaid accepting nursing home if his health got worse. She didn't seem to anticipate his current situation, where he needed a higher level of care assisted living home, but not nursing care. In our state, Medicaid does not pay for assisted living. We are in a tough spot, because by the wording of the trust, we can't give trust principal to my dad (I am trustee). I can however, give him income from trust, but that is complicated, because I would need investments yielding in the 8-9% range yearly for this to work. Was this a bad plan by the lawyer to start with? Anyone else in this situation? Curious how common/uncommon it is. I'm wondering if this Medicaid planning even made sense from the start. There is a good sense my dad would never need a long nursing home stay and would want to just live in assisted living the rest of his life, so I'm not sure of the point of the trusts (they may make things worse for him in the end.)

Find Care & Housing
Have you thought about paying from the trust now, all the income earned, his ss and supplementing the balance from his assets.

That would allow his assets to last longer and keep the trust intact.

That is what I would do to ensure that he can live where he wants for the rest of his life.
Helpful Answer (0)
Reply to Isthisrealyreal
Report

dsivi3124, yes, your dad's situation is interesting and it sounds like you're doing your due diligence as trustee looking ahead to what his future might be. You asked if this trust was a bad plan from the start -- I don't know if it was bad, per se, but it did have risks that are now obvious. Like you, I've found that many trusts are needlessly and sometimes harmfully created by trust-mill attorneys. It's good that you're going to try find a solution with new legal help. Giving away assets, instead of saving them for future care, just to rely on other taxpayers to fund future care in a facility seems like questionable planning to me. This is especially true if you value having the ability to choose a good care facility that best fits your needs, have a private room, etc. Medicaid recipients' care choices are typically limited to least-cost.

     Regardless, your dad's trust already exists and one thought that crossed my mind is that if you have the authority to partially distribute principle funds (in addition to just dissolving the trust), then you could have all beneficiaries sign notarized statements that they agree to gift to your dad all trust distributions that they receive when the time comes that your dad needs more than just income from the trust. Then you could distribute those funds to the beneficiaries monthly or as otherwise needed by your dad. Beneficiaries might be less tempted to keep small distributions for themselves than if they had a large distribution and periodic small tests are less risky than a single, large test. Still, even with protection of notarized statements, one or more beneficiaries could balk -- but, if you can trust the other beneficiaries to do what's right, then this could work. Best wishes.
Helpful Answer (1)
Reply to bicycler
Report

An Irrevocable trust certainly is more difficult to dissolve, in order to help your father financially the beneficiaries would have to agree in effect return the funds to him. The benefit of this type of trust is to stave off Medicaid. There are many mutual funds that can return 7-8% a year with low fees. I hope that the attorney can help you.
Helpful Answer (0)
Reply to DollyMe
Report

My question...can a Irrevokable trust be dissolved?

I know this may be two different things justvwondering. My nephew has a Special Needs Irrevokable trust. As the trustee I am allowed to spend only on certain things. No housing, or utilities can be paid from it. (Telephone and cable are allowed because you don't receive help with these) When he passes, the balance reverts to Medicaid. This went thru the Court.
Helpful Answer (0)
Reply to JoAnn29
Report
dsivi3124 Jan 4, 2020
I think it depends on the trust. In my case, as trustee, I am allowed to dissolve the trust. The lawyer who created it told me as such. Essentially, I can distribute all the trust funds to the beneficiaries at any time and that will terminate the trust.
(0)
Report
I've just read your response to DollyMe about the dissolution option.    If you've read any of posts here over the years, you're aware that not all siblings participate equally in parental care.  

Disbursing the funds now creates no incentive for less than enthusiastic beneficiaries to participate in your father's care.   Even if everyone's on board and in agreement about care now, when people actually start providing care and their time allocation changes, they may feel differently.

That's not an inference that your family wouldn't participate; it's a general observation. 

OTOH, if the plan is for your father to remain in a facility until the end, what would be the obligations for family, other than for visiting, asset management, bill paying, etc.?   Is there real property involved?   When the Irrevocable Trust was entered into, was there a Bill of Sale transferring ALL assets into the Trust?

I think you'd be better off finding a better and perhaps simpler investment and dispensing vehicle, perhaps just a simple Revocable Living Trust with provisions for investments that fund your father's care until he passes, with any residue disbursed to the beneficiaries after your father has passed.

Protection from creditors is an understandable concern, especially if your father may need Medicaid in the future.   I'm not clear though on what level of care he needs - is it a higher level of AL, or something else?

The creditor issue isn't one on which I feel qualified to offer suggestions; and it's not been one that I've had to deal with.   My father, however, lived at home and only spent his last several weeks in Palliative, then Hospice care, so the end of life costs weren't extensive.    And I had managed his funds for years so I knew what his obligations were.

ETA: sorry, I was typing as you were posting.   Give me a chance to absorb the latest update!
Helpful Answer (2)
Reply to GardenArtist
Report
dsivi3124 Jan 4, 2020
So, my dad's is now wheelchair bound because of falls and some bad hip surgeries. He doesn't have any real degenerative medical issues. Just needs the typical help with bathing, dressing, toileting. Hes almost 90. There are people in nursing homes that need similar levels of care as him, but he is also well with the range of care for assisted living homes in our area. The goal would be for him to stay in a nice assisted living home for as long as he is able to. I need to explain something about Medicaid Income only Irrevocable Trusts. They are specific in saying the trust principal CANNOT be used for my dad's care. They have to say this or else all that money would be counted as a resource by Medicaid. Basically, the goal of this trust is that if my dad's health got much worse and he had to go into a nursing home, he would qualify for Medicaid when he spent down his $200K of personal assets and Medicaid could not require him to pay out the assets of his trust. The trust does say that we can use INCOME from the trust to pay for his care.
(0)
Report
@dsivi: I hope you will consult with an elder law attorney (or two - sometimes initial consultations are free) before even thinking about dissolving the trust and giving money to beneficiaries, as you mentioned above. (I may be misunderstanding you.)

While such a strategy might not affect your dad's Medicaid status -- since, technically, the trust owns the assets, not your dad(?) -- I do wonder what would happen if the beneficiaries aren't willing to use that money to pay for his care.

Am I missing something?

Your dad is blessed to have you looking out for him... <smile>
Helpful Answer (0)
Reply to TXGirl82
Report

dsivi...Yes, you can dissolve the trust, make a new Durable POA, Will, Living Will and invest the money for your father, to be used for him, it does not go to the beneficiaries until he dies. Before that they have nothing to do with it. The POA is assigned the fiduciary responsibility of managing & investing the funds for the issuers benefit.

I am not sure why you are worrying about creditors, when he dies there probably won't be much left anyway. Personally, I wouldn't worry about it. It would be a civil matter and unless the amount is large, it will not be pursued by a creditor. That is one of the hooks that attorney's use to entice people into trusts. Actually most people in homes end up being judgement proof anyway, there is nothing to offset.

Visit a new attorney and go from there.
Helpful Answer (1)
Reply to DollyMe
Report

Dsivi, this is a complicated situation, one which really requires review by an estate planner with good experience in a variety of trusts.    You really do need an attorney to help guide you at this point, but I wouldn't consult the attorney who created the trust in the first place.  Find a firm with a good sized estate planning section, and someone with a lot of experience with problems solving experience, creation and management of irrevocable as well as revocable trusts.    

Sometimes sizeable law firms will have these kinds of trust specialists, but they don't always have Medicaid experience although others in the EP practice will.   So a consult with another attorney in the firm may be required. 

One question I have though, and that's if the 20% of your father's assets are still in his name, held jointly with anyone else, or funded into a Revocable Trust?   I'm assuming the 80% in the IT are the assets which are nearly paid out?

I'm also wondering how realistic it was to plan for investments with a 8- 9%yield.    That's a very specific yield range.  

This is a complex situation, with a very complex trust arrangement.
Helpful Answer (0)
Reply to GardenArtist
Report
dsivi3124 Jan 4, 2020
Well, actually, none of the money in the Irrevocable Trusts has been touched. No principal has been distributed, no income has been distributed. All trust income generated has just been reinvested to buy more trust assets (mostly shares of stock.) Let me just clarify the 20% of my dads assets in my dads name. This is about $200K held in a bank account in his name only. He hasn't had to spend it until now. He had a LTC that was covering his care until it recently ran out. In fact, he hasn't had to touch the $200K until now as his S.S. and LTC covered everything until now. As for trust assets, they are things like his home, which was sold a few years ago and investment brokerage accounts. I am looking toward a time a few years down the road, when all personal assets are depleted and we need to live on trust income. 8-9% just about will cover living expenses (hopefully)
(1)
Report
I am not a huge proponent of trusts for the average Joe, mainly because nothing in life remains constant, everything either gets better or worse, with the aged, it always gets worse. And most people never update their trusts, they make them and forget about them.

In the 90's most every attorney I worked with was touting trusts for everyone. In my family we have dissolved every trust, for a myriad of reasons. Including issues with the trustees that were placed initially. One is in prison as we speak. I have restructured their investments, Wills were rewritten and new Durable POA's put in place.

Me, my husband, father and mother never had a trust, we re-evaluate our positions yearly and adjust as needed. The dissolution's were done for my other relatives, whose circumstances had changed since the 90's.
Helpful Answer (0)
Reply to DollyMe
Report
dsivi3124 Jan 4, 2020
Thank you for the response. I take it from what you are saying is that these situations need to reevaluated frequently. Unfortunately, the attorney that drew up and recommended the original trusts has passed away. I talked to the lawyer that bought her practice on the phone and was not impressed, so I think we are going to start fresh with a new elder care practice and ask for a complete re-evaluation of the situation. One thing I do have the option to do (as trustee) is to dissolve all the trusts and give the money to the beneficiaries now and they could use it to pay for my dads case. This causes a bunch of other issues, though. The money is no longer protected from creditors. The whole thing seems messy.
(0)
Report
See 1 more reply

Ask a Question

Subscribe to
Our Newsletter