As clients age, often they are faced with difficult decisions regarding their health. Of course, estate planning attorneys help clients plan in advance for these decisions. We help them prepare powers of attorney for health care and financial matters. We help them prepare a trust and a will. But, sometimes more planning is appropriate.
Of course, everyone wants to age gracefully at home. Sometimes that is possible and loved ones or other assistance allows clients to stay in their home until their deaths. However, sometimes that is not possible, even for the most devoted of families. There was an interesting article in the New York Times which addressed this issue. Alzheimer’s and other diseases sometimes make it impossible or impractical for clients to remain in the home.
There are ways that a client can prepare for that possibility. They can purchase Long-Term care insurance. However, if they are unwilling or unable to obtain such insurance, they can plan so that they may preserve some of their assets when qualifying for Medicaid benefits.
A trust may be used to hold assets which the client wishes to preserve. The trust can provide for children or other beneficiaries during the life of the client and after the client’s death. After the Medicaid look back period (which is 60 months under the Deficit Reduction Act) the transfer will not generate a penalty for the client when they are seeking Medicaid benefits. The trust may be drafted in a way so that the assets transferred to the trust will still get a step-up in basis at the client’s death.
Another option would allow the trust to pay the income from the trust to the client. Of course, in that case, the income from the trust would continue to be an available asset.
As you plan for your clients, remember that some of their most significant future risks are nursing home expenses. There are several ways which can be used to help protect the client and their resources, if they end up needing nursing home care. Help the client choose the method which is best for them.
Stephen C. Hartnett, J.D., LL.M.
Associate Director of Education
American Academy of Estate Planning Attorneys, Inc.
9444 Balboa Avenue, Suite 300
San Diego, California 92123
Phone: (800) 846-1555
www.aaepa.com
- The Magic of Grantor Trusts - September 19, 2023
- IRS Confirms Grantor Trust Status Alone Does Not Cause a Step-Up in Basis - August 15, 2023
- Double Your Gifting with Spousal Gift-Splitting - January 11, 2022
