The Hughes Law Firm

The trust that Mary sets up could be either revocable or irrevocable. The type of trust that Mary would set up would depend on a number of different circumstances, both personal and financial. An irrevocable trust would afford asset protection with respect to problems the other children may have over the years, including divorces, lawsuits, debt problems and irresponsible behavior. A revocable trust will not offer those protections, but is easier to maintain and administer over the years. Counseling with the family will help determine which way to go here.

Now that you have given your assets away, how in the world are you going to live? You may want to retain what is called a “life estate” in your home so that you retain a lifetime right to live in your home even though you have given away what the law calls a “remainder interest.” There are some pros and cons with this approach, but if having a locked-in right to live in your home is important to you so that you don’t have to rely on the integrity of Mary or any of the other children, the life estate approach may be the way to go. But what about the money you give to Mary that she then later puts into the trust? That becomes a bit more difficult because you would really like to have, at the very minimum, the right to get the interest off of the money during your lifetime. However, the trust that Mary sets up does not provide for a mandatory stream of income to you. Remember, you are not the beneficiary of this trust and we don’t want you to be so you can answer “no” to the Medicaid question of whether or not you are the beneficiary of any trust. You will have to rely on Mary to take care of you during your lifetime and distribute funds out to you that you may need for your survival during the rest of your life. That’s why it is important to have at least one trustworthy child who will take care of you. This is usually not a problem in most families. If you retain a power in the trust to make distributions to the children during your lifetime, you maintain some control over the trust which will influence Mary’s “behavior” when it comes to distributions in the future.

Without going into greater detail, this should give you a pretty good idea of the type of planning that is now recommended for giving assets away while you’re healthy. For this technique to fit you properly, you must be highly motivated to protect your assets from nursing home costs, be willing to give up some control of your assets to accomplish that end, have assets somewhere in the $100,000 to $1,000,000 range for optimum suitability and have at least one child in your family that you would trust to make sure that this plan will work properly over your lifetime. If this sounds like you, you are ready to start planning your estate to protect it for yourself and your family for the years to come.

Filed under: Colorado Medicaid, Colorado Trusts by Richard Hughes