When you’re getting older, you might worry about paying for long term care (care at home, in the community, or at a nursing home). These costs can be very high and might force you to sell your home to pay for care. Two ways to protect your home are called a “life estate” and an “irrevocable trust.” While both can help, an irrevocable trust is usually the better choice.
What Are These Options?
Let’s start with the basics. A life estate means you give your home to your children but keep the right to live there for the rest of your life. With an irrevocable trust, you can transfer the deed to your home into the trust, but you cannot change it later. Both options may help protect your home from being counted when you apply to Medicaid for help with long term care costs.
Protecting Your Home from Your Children’s Problems
When you create a life estate, your adult children (or whoever’s name you put on the deed) immediately own part of your home. This can cause problems you didn’t expect. If one of your children gets divorced, goes bankrupt, or gets sued, their share of your home could be at risk.
Also, if one of your children dies before you do, their share might go to their spouse or children. This could mean someone you do not intend ends up owning part of your home.
A trust protects your home from these problems. The trust owns the home, not your children directly. This keeps the home safe from your children’s financial or legal troubles.
Keeping Your Business Private
When you create a life estate, the paperwork becomes public record. Anyone can look up who owns your home. This might cause family fights or unwanted attention.
The details of a trust stay private.
Medicaid Planning Benefits
Both options require waiting five years before they help with Medicaid planning. But trusts can be set up to give you ongoing benefits while still protecting your assets. For example, an attorney can draft an “income only” trust, so if the trust produces income, you can receive that income on a regular basis, without affecting Medicaid eligibility.
Making the Right Choice
While a life estate might seem simpler and cheaper at first, a trust usually works better in the long run and involves less risk.
Every family is different, though. What works best depends on your specific situation, your family relationships, and your financial goals. You need to work with lawyers who understand elder law to figure out what’s right for you.
Founded by a nurse attorney and with offices in Acton, Andover, and Sudbury, Massachusetts, Generations Law Group helps individuals and families navigate the complex areas of estate planning and elder law to inform and protect loved ones of every generation.
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