Trusts are legal structures often used by Elder Law attorneys. Their purpose is to preserve income or assets that you would otherwise be forced to spend on your care. Trusts can be an excellent way to protect your home and preserve your equity. They can shield you from being exposed to Medicaid liens when you no longer live there. They can also shield you from estate recovery.

What happens if you keep the home in your name

Consider you own a house, condominium or cooperative apartment worth $500,000 in today's market. You bought it 40 years ago for $35,000, and your mortgage is paid off. Now you need long-term home care. Your primary residence is an exempt asset for eligibility purposes, but that's not the end of the story. Medicaid may eventually require that some or all of the equity be used to reimburse the cost of your care.

Medicaid can seek to recover their costs in two ways. The first is by placing a lien against your property when you move out permanently. The second is by recovering from your estate via a lien when you die. In both cases, the lien will be equal to the costs that Medicaid incurred for the benefits provided on your behalf.

Long-term care is ruinously expensive. Costs can quickly rise to an amount that would exhaust your entire home equity, should a lien be enforced. Your home equity would be paid to the government to repay the cost of your care. Nothing would be left for your children, loved ones or other heirs.

Why Trusts are so useful

A trust can be used to prevent these unfortunate outcomes. By transferring your home to a trust, you are no longer the legal owner of the home. The home is therefore not subject to a Medicaid lien, or the claims of any other future creditors.

An eldercare attorney can structure a trust to achieve your goals. First, it can allow you to live in your home as long as you wish. A trust can also contain instructions to transfer ownership to your designated beneficiary after you pass.

Keep in mind, if you should require nursing home care within the ensuing five years, the home transfer will be subject to the look back period and could result in a period of Medicaid ineligibility. In this event, other strategies may be available to protect a substantial portion of your home equity.