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.)
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.
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.
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.
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>
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!
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.
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.
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.