Using a Trust to Pay for Long Term Care

There are many different ways to pay for long term care. One financial instrument that can be used is a trust.  A trust is a legal entity that allows a person (the trustor) to transfer assets to another person (the trustee). Once the trustor establishes the trust, the trustee manages and controls the assets for the trustor or for another beneficiary.

You may choose to use a trust to provide flexible control of assets for the benefit of minor children. Another common use of a trust is to provide flexible control of assets for an older adult or a person with a disability, which could include yourself or your spouse. Two types of trusts can help pay for long-term care services: Charitable Remainder Trusts and Medicaid Disability Trusts.

Charitable Remainder Trusts

This trust allows you to use your own assets to pay for long-term care services while contributing to a charity of your choice and reducing your tax burden at the same time. You can set up the trust so that you receive payments from the trust to use for long-term care services while you are alive.

When you die, the balance of the funds in the trust goes to the charity that you selected. Since you are making a charitable donation, you can receive tax deductions for the fair market value of the assets that go to your chosen charity.

Key things to consider before setting up a charitable remainder trust:

  • The amount of money available to you to use for long-term care services is based on the amount of your donation. These payments are only likely to be large enough to help pay for long-term care expenses if you donate a substantial amount of money to the charity.
  • The donation may affect your Medicaid eligibility.

Medicaid Disability Trusts

These trusts are limited to persons with disabilities who are younger than age 65 and qualify for public benefits. Parents, grandparents, or legal guardians often set up these trusts to benefit persons with disabilities and a non-profit organization manages the assets. This is the only kind of trust that is exempt from rules regarding trusts and Medicaid eligibility.

Key things to consider before setting up a Medicaid Disability Trust:

  • If a beneficiary with a disability receives Medicaid benefits, the state can recover any amount remaining in the Medicaid Disability Trust when he or she dies.
  • The tax implications for Medical Disability Trusts are complicated. Consult a tax professional before establishing a Medicaid Disability Trust.

If you need legal advice in managing an estate, trust or other elder law issue, the Law Office of Scott C. Painter can help. We specialize in elder law issues ranging from nursing home planning, guardianship, wills, trusts, estates, veteran’s benefits, and other related legal matters. Attorney Scott Painter is CELA® certified under the National Elder Law Foundation (NELF).  A call to us is free, and the best advice is to act now to educate yourself about your options. Waiting to seek legal counsel may limit your options and be costly. Call now for your free consultation 610-378-5140 or visit http://painterelderlawpc.com/ for more information.

For more information, see https://longtermcare.acl.gov/costs-how-to-pay/paying-privately/trusts.html.

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