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What type of trust protects assets from long-term care costs?

What type of trust protects assets from long-term care costs?

Q: Are asset protection trusts revocable?

Asset protection trusts are generally irrevocable. This means that once the trust is created and assets are transferred into it, the trustmaker cannot change or revoke the trust. This irrevocability is a key feature that helps protect assets from creditors and long-term care costs.

Q: What type of trust is best for asset protection?

The best type of trust for asset protection is often an irrevocable trust. This type of trust removes assets from the trustmaker's ownership, which can help protect them from creditors and long-term care costs. It's important to consult with a legal professional to determine the most suitable trust for individual circumstances.

Full question:

Which trust is required for asset protection, specifically protection from long-term care costs? Can a married individual be the sole trust maker of this trust? Is there any condition under which this trust may become revocable?

Category: Medicaid
Date: 04/07/2025
State: Massachusetts

Answer:

An asset protection trust is designed to safeguard a person's assets from future creditors, including long-term care costs. These trusts are often irrevocable, meaning the trustmaker cannot benefit from the trust during their lifetime, which helps in protecting the assets.

A married individual can indeed be the sole trustmaker of this type of trust. However, the trust's irrevocability typically prevents the trustmaker from altering or revoking it once established.

In certain situations, a trust may become revocable. For example, if the trust is structured to allow the trustmaker to regain control under specific conditions or if it is a revocable living trust, the trustmaker can amend or revoke it while they are still competent. However, for asset protection purposes, irrevocable trusts are more common.

It's essential to be aware of the look-back period for Medicaid eligibility, which is five years. Transferring assets into a trust to qualify for long-term care assistance can lead to penalties if done within this timeframe (Deficit Reduction Act of 2005).

This content is for informational purposes only and is not legal advice. Legal statutes mentioned reflect the law at the time the content was written and may no longer be current. Always verify the latest version of the law before relying on it.

FAQs

What is a major disadvantage of an asset protection trust?

A major disadvantage of an asset protection trust is its irrevocability. Once assets are transferred into this type of trust, the trustmaker typically cannot alter or revoke the trust. This means the trustmaker loses direct control over the assets, which can be a concern if their financial situation changes or if they need access to those assets in the future.

Does an irrevocable trust protect assets from a nursing home?

Yes, an irrevocable trust can protect assets from nursing home costs. By placing assets in an irrevocable trust, the trustmaker no longer owns them, which can help shield those assets from being counted for Medicaid eligibility. However, it's crucial to consider the five-year look-back period for Medicaid, as transferring assets into a trust within this timeframe may result in penalties.

Can an asset protection trust be revocable?

Typically, an asset protection trust is irrevocable, meaning the trustmaker cannot change or revoke it once established. However, some trusts may be designed to allow for revocation under specific circumstances, but this is less common for asset protection purposes. Revocable living trusts, while flexible, are not primarily intended for asset protection.

What is the difference between a revocable trust and an irrevocable trust?

The main difference between a revocable trust and an irrevocable trust is control. A revocable trust allows the trustmaker to alter or revoke the trust at any time, maintaining control over the assets. In contrast, an irrevocable trust cannot be changed or revoked once established, which helps protect the assets from creditors and long-term care costs.