Medicaid Trust (Irrevocable Grantor Trust)

Many people are unaware that creating a Medicaid Trust in NYC, Westchester, or the NY Metro area can help them protect the assets they have accumulated over a lifetime of hard work. A trust, as used in Elder Law planning, is a legal entity that allows you to preserve assets that you might otherwise be forced to spend on your care. Think of a trust as another person.

In order to be eligible for Medicaid, you must have very little money in your name. If you do not plan, Medicaid will insist you use what Medicaid calls your “resources” before it provides even a dollar of benefits. Your "resources" include bank accounts, investments, cash value of life insurance, co-ops, real property, and more. One way to become eligible for Medicaid is to “spend down” your assets.

However, you do not have to spend down all your money and property if you create and fund a properly structured Irrevocable Asset Protection Trust. When you transfer your assets to an irrevocable trust, they can no longer be regarded as your resources for Medicaid purposes, or by potential creditors. Trusts can be used to protect real estate, cash, other financial assets, and even valuable tangible assets such as art or jewelry.

An Irrevocable Asset Protection Trust, also known as a “Medicaid Trust” or a “Medicaid Asset Protection Trust,” can be structured so that the income generated from the assets in the trust will be paid to you. With an asset protection trust for elderly residents of NYC, Westchester County and the NY Metro Area, the income from the trust can be spent to help maintain the lifestyle you’ve worked hard to create. While you will have no right to access or demand principal from the trust, your Trustees can be given the discretion to distribute principal amounts to beneficiaries (often children or other family members) who can use these distributions for your benefit.

If the Elder Law asset protection trust holds title to your home in NYC, Westchester, or elsewhere in New York, you can still have the right to live there for the rest of your life, or in another residence that the trust might purchase in the future. If you own a co-op apartment, permission of the co-op’s Board of Directors must first be obtained before you can transfer your co-op shares and proprietary lease into the trust.

Aside from protecting your assets from Medicaid eligibility requirements, transferring assets to a trust is almost always preferable to transferring money or assets to children directly. Here’s why: most trusts protect the assets from exposure to future creditors, lawsuits and legal liability. If a child is holding your assets, and incurs a liability, suffers a business failure or a divorce, or even dies before you, those assets could be exposed to potential loss. Assets held in most irrevocable trusts will be protected, while funds held by individuals will not.

In addition, assets that pass via an asset protection trust, rather than being gifted during the lifetime of the donor, allow the beneficiaries to avoid capital gains tax on unrealized gains accrued during the lifetime of the grantor.

There is an important time element to the planning that may affect what percentage of your assets you can save. If you need nursing home services, or services in your home (or other “Community Medicaid” services), the rules are different. Compared to other states, New York has very generous Medicaid rules, but the rules are becoming more restrictive.

The timing of many of these restrictions on New York's Community Medicaid programs has been delayed due to the Coronavirus pandemic, and the implementation schedule remains a question mark. The one thing that is certain is that the earlier you act, the more of your assets you are likely to save.

Setting up and funding a trust can help you to make your financial resources last as long as possible and ultimately fulfill your estate plan. As an Elder Law, Estate Planning, and asset protection firm, Lamson & Cutner can help you evaluate whether a trust makes sense for your situation. To learn more, if you or your loved one lives in NYC, Westchester or the NY Metro area, contact the experienced attorneys at Lamson & Cutner today.

Trusts in Elder Law and Estate Planning

Trusts are among the main workhorses of Elder Law and estate planning, and are some of its most powerful and valuable tools. They serve a number of useful purposes. Most people understand the concept of a Will, but a Trust can serve the identical function as a Will without its inconveniences, and provide significant additional advantages as well.

The grantor names the “trustee,” to hold and manage assets on behalf of a beneficiary or beneficiaries. The trust itself is legally a “person,” and is the owner of the assets that the grantor (or others) transfer to it.

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If you create a trust and place your assets into your trust, you might not need a Will at all. You can designate in the trust agreement what happens to your assets upon your death, in the same way that you would in your Will.

Assets that are in your name alone at the time of your death are subject to your Will, and are required to go through a court process called “probate” before they can be distributed. Probate is public, and often expensive, frustrating, uncertain and time-consuming.

A benefit of all trusts is that assets in the trust are not subject to probate. Distributions can be made quickly and efficiently, the process is private, and far less costly and time-consuming than a probate proceeding.

Different kinds of trusts have different requirements and benefits, and different levels of control by the grantor. Revocable trusts are used for estate planning, avoiding probate, and maintaining privacy. Irrevocable trusts also avoid probate, but at the same time they afford asset protection and facilitate eligibility for government benefit programs such as Medicaid.

Supplemental Needs Trusts, also known as Special Needs Trusts, provide support for persons with disabilities without compromising their eligibility for government benefit programs.

The first step in creating a trust generally involves meeting with a trust lawyer who will review your assets, income, goals, and objectives. Then, he or she will create the trust agreement and help you “fund” the trust. The experienced attorneys at Lamson & Cutner have the knowledge and skills in elder law trusts to help you preserve your assets and income to the greatest extent possible, while ensuring efficient and prompt distribution of your assets to your chosen beneficiaries upon your death.

The types of trusts for the elderly typically used in Elder Law planning include:

Every case is individual and unique, and you’ll need proper advice on what trust configuration will deliver the maximum advantage for you. Different trust strategies apply to various economic and family situations, and often depend on whether you need, or want to plan against the risk of needing, home care or nursing facility care. Trusts are the most effective and prudent way to hold and protect your assets, and they’re fully authorized for this purpose under Federal and New York State laws.

If you already have a trust created for estate planning purposes, your trust should be evaluated by an Elder Law attorney. Make sure that you have focused on the serious financial risks that you may face, in particular the potential need for long-term care at some point. The goal of our services is always to put you in the best position possible to maintain your lifestyle, and to protect your and your family’s financial future.

When you need a trust attorney, choose the caring, experienced legal professionals at Lamson & Cutner. With offices in both NYC and Westchester County, we are conveniently located and prepared to help you create or update elder law trusts. You can speak to us from the comfort of your own home, if you prefer, via Zoom or conference call. To learn more about your options or to schedule a consultation with an estate planning attorney or Medicaid trust attorney, contact us today.

Revocable Trust

Creating a revocable trust, also called a “living trust,” is a strategy that is frequently used for estate planning. It is often appealing because during the Grantor’s lifetime, he or she can be the Trustee, and retain full control over the assets in the trust. Once the Grantor passes away, any assets that remain in the revocable trust are distributed under the terms of the trust, and are not subject to probate or administration in court.

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Probate is the process of administering and distributing the assets that are in the name of a deceased person who has a Will. The process has numerous drawbacks. First, it is a court proceeding, so whoever is named as the Executor in the Will must petition the court and obtain a court order before he or she can act on behalf of the estate. Heirs and potential heirs are required to be located, notified, and given a chance to object to the Will. When there is no Will, the process is called Administration. Administration is a similar court proceeding, where the beneficiaries are prescribed by New York law rather than by a Will.

Both processes are subject to the timing of the court and the judge, which has always been uncertain, and has become even more so since the Covid pandemic. They are also public, so anyone can learn about the decedent’s assets and heirs. Finally and not insignificantly, all of these steps mean that either procedure is time-consuming and costly.

For all these reasons, avoiding probate or administration is a worthwhile objective, for which the revocable trust works well. However, a revocable trust does not work if you wish to become eligible for government benefit programs such as Medicaid.

A revocable trust can be revoked or amended at the option of the Grantor – in other words, the Grantor still has control over the assets and has the ability to withdraw any or all of the assets at any time. The assets in such a trust are considered “resources” by Medicaid, and would be required to be used to pay for the person’s medical or disability needs. That means that the Grantor will not be eligible for Medicaid until the assets in the revocable trust are almost completely depleted.

To become eligible for Medicaid, a Grantor will need to establish a properly structured, irrevocable trust. This means that the Grantor is irrevocably (permanently) giving up ownership of and control over the assets. The Trustee(s) of the trust can be the grantor’s children, for example, who could choose to pay for the Grantor’s needs – but the Grantor does not have the ability to require them to do so.

If you already have a revocable trust created for estate planning purposes, your trust should be evaluated by an Elder Law attorney. These trusts work well if the only goal is estate planning. However, they are not asset protection trusts, and the assets held in such trusts will be counted as your own resources for Medicaid eligibility purposes. A consultation will help you to understand whether a revocable or an irrevocable trust is the appropriate instrument to achieve your goals. Contact us now to schedule a consultation!

Laws for those with Paws: Estate Planning for Your Four-Legged Family Member

It is no secret that dogs and cats have seen their status elevate in the last few decades. Pets have transitioned from mere companions to become beloved members of the family. Over 100 million households have pets across the United States. An astounding 84% of these pet owners refer to themselves as the “mommies and daddies” of their pets.

Regardless of whether you fall into the category of a self-professed pet parent or are simply a proud pet owner, it is important to consider what would happen to your beloved fluffy (or feathery, scaly, or other!) friend, should you pre-decease them.

Across the nation, state legislatures have demonstrated their support for advance planning for our pets. As of 2021, every state has passed a law allowing for the valid creation of Pet Trusts. A Pet Trust is a legal document that provides a plan for the care and maintenance of your pet should you become incapacitated or pre-decease your pet.

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A Pet Trust functions similarly to any other trust a person can create. A Grantor, usually the owner of the pet(s), will enter into a trust agreement with a Trustee. The Trustee assumes the responsibility of ensuring that the trust terms are followed.

The Grantor may leave specific instructions for the Trustee within the trust agreement. These instructions can name a caretaker for your pet and the veterinarian your pet will continue to visit, among other maintenance requests. Importantly, the Trust will own assets you designate to finance the care of your pet until his or her death.

The Trust must also include a provision directing the disposition of the remaining funds at the end of your pet’s life. Popular choices include either to a charity in support of animal welfare, or to the person who took care of your pet after your passing.

Not only does a Pet Trust provide funding and instructions for your pet’s care, but it will also enable you to avoid what could potentially be an adverse Court proceeding. Provisions made for pets in Last Wills and Testaments are subject to review, and can be determined to be invalid by the Surrogate’s Court when the Will is probated. In some cases, gifts for the benefit of pets have been deemed “too lavish.”

Even if the pet provisions in the Will are found to be valid, the funding needed to care for your pet will not be available until the Court has ruled and given authority to the Executor. This can take months or even years.

With a Pet Trust, in contrast, there is no court proceeding. Once you pass away, the Trustee can move immediately to carry out the instructions provided in the trust agreement. This will ensure seamless care for your pet.

Pets are family, too. Don’t forget to plan for their futures, as they surely will never forget you!