Planning for Long Term Care Using Irrevocable Trusts

Medicaid (called “MassHealth” in Massachusetts) can help pay for long term care either at home or in a nursing home. If you think MassHealth’s assistance will be needed in your or your loved one’s future, it’s always best to plan in advance.

Five Year Look-back

If you apply for MassHealth benefits, the state has the right to look at all your transactions of $1,000 or more over the past five years. If any money or property has been given away during this five-year period (whether in the form of an outright gift, transfer to an irrevocable trust or a transfer for less than fair market value), the state may impose a penalty period which may cause a delay in MassHealth eligibility at a nursing home. This is known as the “five-year look-back”.

Irrevocable Trusts

There are opportunities to protect your assets if you act more than five years prior to needing MassHealth’s assistance to pay for your nursing home care. One method is to utilize an Irrevocable Trust.

When deciding whether to put financial resources into an Irrevocable Trust, we advise our clients to make sure to leave enough money outside of their Trust to be able to potentially fund private home or nursing home care for five years. The purpose of this conservative approach is to ensure that if an unexpected health event occurs, the assets placed in the Irrevocable Trust are protected for the full five-year lookback period.

Depending on your assets and life situation, there may be an opportunity to place a house or other assets in an Irrevocable Trust. This planning technique could be used, for example, to avoid MassHealth placing a lien on your house in the future.

In most cases, an Irrevocable Trust can only be set up for a home if there is no mortgage or line of credit on the property. You will have to name someone to be Trustee of the Trust and we recommend that this not be you or your spouse; consequentially, you will have some loss over control of your property. For instance, you will have to go through your Trustee if you want to sell your property.

An Irrevocable Trust can be drafted to allow you to continue to live in the home, occupy the home and maintain the home. You will not, however, be able to draw on the value of the home by way of a mortgage, home equity line, or reverse mortgage. When considering whether or not to put real estate into an Irrevocable Trust, the value of your home cannot be part of the plan to fund your retirement.

Irrevocable trusts can be a powerful tool in protecting assets from MassHealth and nursing home care. It is a good idea to have your current estate plan reviewed by an elder law attorney by the age of 70 (although the earlier the better!).

Founded by a nurse attorney and with offices in Acton and Sudbury, Massachusetts, Generations Law Group helps families navigate the complex areas of estate planning, elder law, and probate to inform and protect loved ones of every generation.


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