Revocable and Irrevocable Trusts for Assisted Living
Question: About six years ago my parents signed two trusts: a revocable trust and an irrevocable trust. They transferred about $150,000.00 into the revocable trust and their house into the irrevocable trust. They sold their home about three years and deposited $400,000.00 into the irrevocable trust. My dad passed away and my mom is at an assisted living. I went to the bank and I was told that I do not have access to the revocable trust because I am not the Trustee but I am the Trustee of the irrevocable trust. Can I use the money in the irrevocable trust to pay for the assisted living?
Irrevocable Trusts and MedicaidNo, you cannot use the money in the irrevocable trust to pay for your mother’s assisted living. In order for the irrevocable trust to be considered exempt for Medicaid purposes, it must provide that no principal distributions can be made to the grantor (your mother) or on the grantor’s behalf. In other words, any distribution made from the irrevocable trust to your mother or directly to the assisted living would violate the terms of the trust. Since the house was transferred to the irrevocable trust over five years ago, the money in the trust is protected in the event your mother requires care in a nursing facility.
Even though your mother is currently in assisted living, it is still important to keep the irrevocable trust in tack because she may need to be transferred to a nursing facility which would result at the rapid depletion of her assets. The average nursing home stay is $15,000.00 per month. The money in the irrevocable would be considered exempt if your mother needed to rely on Medicaid to pay for the nursing facility.
Revocable TrustsThe money that is held in the revocable trust can be used to pay for the assisted living as your mother maintained complete control over the assets during her lifetime. The revocable trust offers no assets protection with respect to Medicaid eligibility. The assets held in the revocable trust can be freely transferred and the trust can be changed or revoked at any time. I understand that you do not have access to this trust as you are not the Trustee. It would be my recommendation to schedule an appointment with an elder law attorney and your mother in order to make the appropriate changes to the revocable so that you have access to this money to pay for the assisted living. Spending the money in the revocable trust on the assisted living is allowable and also the better option as this money is not protected if your mother requires care in a nursing facility.
ConclusionUnderstanding the documents you or your family members have is imperative in order to make sure the maximum amount of protection is achieved during any health crisis.