February 24, 2024 • 20 mins
Embark on a journey through the complex landscape of Elder Law with me, Todd Whatley, as your guide. Together we'll uncover the benefits and drawbacks of Irrevocable Trusts, a critical tool in asset protection. This episode promises to illuminate the path for safeguarding your clients' assets from Medicaid, while carefully considering the irreversible sacrifices that come with it. You'll gain insights into the delicate balance of asset protection, especially when handling family treasures like farms, and learn when to implement these trusts or when to proceed with caution.
As we navigate the nuanced strategies of estate planning, I'll share my perspective on why long-term care insurance is not just an option, but a cornerstone in protecting assets during the trust's look-back period. In addition, I'll debunk some dangerous myths surrounding asset protection tactics – think twice before you advise a client to pursue divorce as a strategy! For those eager to deepen their expertise in Elder Law, I extend an invitation to join my coaching program, where we can grow and learn from one another. Tune in for a masterclass in the art of Elder Law and take a giant leap towards becoming a trusted advisor in this rewarding field.
Check out our new website www.TheElderLawCoach.com.
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:02):
You're tuning in to the Elder Law Coach podcast, the
definitive resource forattorneys delving into the world
of Elder Law, with your host,todd Watley, a certified Elder
Law attorney, past president ofthe National Elder Law
Foundation and renowned coachwith a quarter-century of
specialized experience.
Whether you're an establishedattorney looking to refine your
(00:24):
expertise or an emerging lawyerseeking a successful foray into
Elder Law, this is yourmasterclass.
Now let's get started with theluminary in the field.
Here's Todd Watley.
Speaker 2 (00:37):
That's right.
This is the Elder Law Coachpodcast and, as always, I'm
super happy that you arelistening and thank you so much
for downloading.
This thing seems to be growing.
As soon as I put one up, I'mgetting quite a few downloads,
and that always makes me happy,and I would love to hear from
you.
So if you do have ideas,suggestions, comments,
(01:01):
complaints, gripes, hey, I'mopen.
Please email me at Todd attheoddlalkoachcom.
I would love to hear from youjust to know if I'm doing it
right or not, and definitely, ifthere is a topic that you want
me to talk about, I would loveto hear that.
(01:22):
So, as with most of my podcasts,they come from things that
happen.
I am still a practicingattorney.
I see things all the time, anda lot of times the podcasts are
created from situations that Isee and have to deal with, and
so today's thing is I washonestly surprised that I had
(01:45):
not done a podcast on it,because this is one of the most
major things we do as elder lawattorneys, and I don't do a lot
of them, and you'll see why onceyou get to the end of this
podcast.
But the Irrevocable or AssetProtection Trust is a tool that
we can use and I see it misusedso many times.
(02:10):
You know, a lot of times,particularly non-elder law
attorneys, if they're dealingwith someone with some assets
worried about nursing home care,it's like, oh, we do an
Irrevocable Trust, assetProtection Trust that'll protect
the assets.
Well, yeah, but you can cause awhole lot of problems, and so
(02:30):
today's episode I want to gothrough and walk through this
process with you of number onewhat it is, give you a quick
definition of the AssetProtection Trust that is
commonly used when it's notappropriate and then when it is
appropriate, and hopefully youcan learn from this and not put
(02:52):
some people in some badsituations or not miss out when
it could be done for some folksthat truly do need it.
So let's start out with the when.
Well, let's begin with what itis, okay.
(03:12):
Number one the Asset ProtectionTrust is typically the
Irrevocable Trust that we createwhen someone is wanting to
protect their assets fromMedicaid.
You do understand that whenthere is a transfer and that's
what this is we're transferringthe assets into a trust that you
(03:34):
definitely no longer benefitfrom, and typically I would
recommend that you no longercontrol when you do have control
.
There is some argument there bythe state that you could
control the trust so that itwould benefit yourself.
And there are some people whowill do an income only trust,
(03:55):
meaning that only the income iscountable, but it is countable
all the way up until the end.
So typically when I do anirrevocable trust, it is a trust
that my client no longercontrols, nor do they benefit
from, and if you'll make it thatclear and that concise, you can
make sure that the state willnot come back after it.
(04:16):
So that's number one.
It's a trust that can holdassets that will be protected
from Medicaid but since it is atransfer, you are losing control
and benefit of that asset there.
It is subject to the five-yearlook back and therefore Will
(04:39):
cause a problem if you do itinappropriately.
So let's talk about the Caseswhere it's not appropriate.
It is not appropriate for lowasset cases.
Yes, someone may come to youand say, hey, I've got a home
and some land and a little bitof money and I want to protect
it from Medicaid.
Well, I understand that, butnot having the assets to get you
(05:03):
through that five-year lookback is a problem.
And Even if this person isn'treally good health and you're
almost absolutely sure they canmake it.
I am still very cautious aboutputting someone into an Asset
protection trust if we don'thave the money to get us through
those five years and and therules with returning a gift are,
(05:29):
you know, basically thwartedwith this trust and I'm in
Arkansas, as you probably know,and they are very particular
that, yes, you can return a giftand the portion that you return
will reduce the gift amount,but it is absolutely mandatory
that the person who wouldreceive the gift has has to
(05:51):
return the gift and if someoneelse returns the gift to replace
that gift, that is notConsidered a return of the gift
and therefore does not reducethe penalty.
So if you put an asset into thisirrevocable trust that Cannot
give assets back to the grandtour they are not the
(06:12):
beneficiary of this trust youwould be violating the terms of
the trust.
If you gave assets directlyback to the grand tour In a
state like mine, you would notreduce the gift.
So therefore, once you put itin there, you're stuck.
Okay, you can't undo it.
And the way that I do this andit's a huge selling point is
(06:34):
people think when you mentionputting your assets into an
irrevocable trust, they thinkthat you're doing it, that
you're putting all of theirassets in there and definitely
you're not you really do need tokeep out enough money to pay
for five years.
And so, basically, just takeyour average nursing home cost
today and I know this isn'taccurate, but chances are
(06:58):
they're not going into thenursing home the day after you
do this, but run the numbers asif they did today's cost minus
their income Means thedifference they would have to
pay out of assets to get theminto the nursing home.
Multiply that by 60 and sotherefore, that's the lump sum
(07:18):
that someone would need to getthem through a five-year look
back.
Well, that's going to be a fewhundred thousand dollars.
So therefore you don't put afew hundred thousand dollars in
there, which means you have tohave Many more than a few
thousand dollars to put into thetrust to make it worthwhile.
(07:40):
So that's why one of the youknow cases where this is not
appropriate is the low assetcases, and when I say low assets
, as a very general rule notcounting the house we're talking
about half a million dollars,because you're going to need
some money to pay for thenursing home Through those five
(08:02):
years and your client reallydoesn't want to be broke for the
rest of their life.
They need some money so theycan go do things.
They don't have to go beg thekids for money.
So generally I will keep outtwo or three hundred thousand
dollars at least so that thefamily or the couple your client
has money to survive.
(08:22):
And if they did have to go intothe nursing home for the next
five years they would have moneyTo pay it.
Okay Now, obviously that thereare exceptions to this, and and
one of those is the big familyfarm and I'll cover this more
under where it's for.
But you know there are going tobe some exemptions to this and
(08:46):
exceptions, but the family hasto understand this and take this
into account.
The next situation is If youknow the person's going into the
nursing home within five years,it's not that you can't do this
.
Trust, if they have a lot ofmoney, sure you want to stop the
bleeding.
(09:06):
At five years and having two orthree million dollars, this
still makes sense, even thoughthe person is going into the
nursing home today.
Let's put it in there.
That's congress's Agreement tosay, hey, look, if, if you'll
pay for five years, we'll payfor Anything after that.
So sure, if someone's goinginto the nursing home.
(09:30):
It's not that the trust neverworks, but it's rare that they
have enough money to get themthrough five years and then
still enough money, still haveenough money for this trust to
work.
So the other thing is, you knowjust if, if they're in perfect
health, that amount that youkeep for five years can be
(09:52):
reduced because you're likechances are they're not going to
go in for the next year or two.
So all of this is very general,but I just don't want you to
think, oh, this person has someassets they've asked me about an
irrevocable trust, so let's doit.
It's just truly not appropriatein those situations.
The last situation which reallynot appropriate is the tax hits
(10:16):
going to be so major is if that, if basically all of their
assets are in IRAs or qualifiedmoney.
When it's in qualified money,that money's never had taxes
paid on it and therefore for usto put it into this irrevocable
trust, that is going to be ataxable event.
They're going to owe taxes andonce you get north of $450,000,
(10:39):
$500,000, you're at the veryhighest tax bracket of about 40%
federal tax and whatever yourstake tax is.
So you're easily pushing a 50%tax to get this IRA to be
protected and when you startlooking at enough money to put
into this trust and make thisworthwhile, your tax bill is so
(11:03):
huge they've got to be in thenursing home, they've got to
benefit from Medicaid by beingin the nursing home for a really
long time.
It just doesn't make sense andso it is depressing.
These are great when you'reyoung and putting money, it's
like, hey, I'm not paying taxeson this.
But man, when you get owed anda client comes into you, they've
(11:25):
seen, perfect, there's a homeand some extra land, and they
have $600,000, $700,000,$800,000, you're like, yep, this
is a great, irrevocable case.
And then you look at thefinancials and 700 of the 800 is
in IRAs.
You're like, ugh, this is notgoing to work.
It's just sad, you know.
(11:46):
And you just tell them look,this trust is just simply not
going to work for you and Ihonestly don't know how we're
going to get you onto Medicaidbecause most of your money has
never been taxed and this isgoing to be a problem.
Okay, so the dreaded IRAs.
So when is the irrevocabletrust appropriate?
(12:08):
Obviously, the largest states.
Okay.
When you have someone coming inwith two, three, $4 million and
it's not in IRAs.
That's a perfect case.
You know your.
You know Congress fusses at usevery time they start looking at
the Medicaid expenditures andfussing.
(12:30):
It's like you got lawyers outthere putting millionaires on
Medicaid.
Well, yeah, we're doing itbecause y'all make the rules and
this is one of those situations.
I'm not a huge advocate of this, but you can and it's our job
to do what our clients want,following the rules.
And if they have three, $4million and they're willing to
lose control of it and losebenefit of it, this trust makes
(12:54):
total sense for them.
Just know, keep out enoughmoney to pay for the five years
If they need it.
Don't get them completely broke, but you can get them in a much
better position five years fromnow for getting their care paid
for through Medicaid than theyare now.
(13:15):
All right, this is always a fun.
Second case is where there's afamily form and there's not much
else.
And you know I did mentionabove, if there's not enough
money to get them through thosefive years, this is a problem.
Well, if that's just, if it'sjust real estate and not much
else, you know, just do somekind of payable on death deed on
(13:40):
the house.
Try to protect the house fromprobate, get it to the kids at
death and you're done, or youknow where they can sell it or
do something with it.
And dealing with the familyfarm that's been in the family
for generations, they absolutelywant to protect it, and
particularly if the parentsdon't live there anymore.
(14:00):
They own it, but it's not theirhome.
It's a countable asset, allright, and so this is where the
irrevocable trust comes in.
And so some of you out there waslike, well, you could add their
name to it as a joint owner andthen it would not go through
probate and under many Medicaidrules, if it's jointly owned
(14:21):
with a right of survivorship, itis a non-countable asset, that
is true.
But when you add someone's nameto it, you're going to lose
part of your step up in bases,and many times that's important
with this farm it's like, well,they may never sell.
Okay, if they're never going tosell, then yeah, putting their
name on it is a much cheaperoption.
(14:43):
But you just don't know.
You just don't know what thefamily is going to do Once your
client passes away.
What if there's huge pressureto sell?
They don't want to keep itanymore?
There's going to be a capitalgains issue.
That's easily avoidable withthe irrevocable trust.
A really good situation for theirrevocable trust, the asset
(15:05):
protection trust, is when thereis this piece of land that the
family really wants to keep,even if there's no money.
You just tell the kids look,y'all've got to either take care
of mom and dad at home for ascheaply as possible or, if they
go into the nursing home, y'allgot to pay.
That's your investment toprotect this farm and get it to
(15:27):
pass to you without Medicaidtaking it, without losing your
step up in bases.
I mean this is going to be thebest way possible Because I'll
tell the client hey, this isgoing to be really cheap
long-term care insurance for you.
You're going to pay me for thistrust, which is $7,000, $10,000
.
Bye, your long-term care isgoing to be paid for by the kids
(15:52):
for the next five years andfrom the state from then on.
So it's well worth it.
The kids understand they'rewilling to chip in, hopefully,
and keep mom or dad out of thenursing home, or Chip in and pay
for the nursing home if they goin so they can keep this farm.
Here's probably the idealsituation where the trust comes
(16:14):
in.
And if you have someone in youroffice or a good friend who
sells long-term care insurance.
A really good scenario.
Just the teaming up of twothings is number one.
If these people are fairlyhealthy, not going into the
nursing home anytime soon, getthem a basic long-term care
insurance policy.
(16:34):
Calling your friend who's willsell them.
This policy can discuss that ifyou don't Get them a long-term
care policy for just five years,okay.
So look, we're gonna buy thisthing for five years.
At the end of Five years we'regonna stop it, because at the
beginning of the five yearswe're doing this irrevocable
(16:55):
trust, putting as many assets init as we can, and this way you
don't need to keep out the twoor three hundred thousand
dollars to get through the fiveyears, because the insurance
policy is going to pay for it.
Even make the kids pay for it.
Let the kids pay the long-termcare insurance, with the
understanding that if mom anddad need nursing home care, this
(17:15):
insurance policy is going topay and we get to keep the Form
okay or whatever is in thestress, whatever assets we put
in this dress.
And you put almost all of yourassets then, knowing that the
nursing home is paid for if theyneed it within the next five
years and then, after five years, drop the policy.
(17:35):
You don't need it anymore.
Okay, that's just the the idealsituation where you know it's
what the client needs.
They need insurance to getthrough these five years.
They have a tool that you'recreating for them to protect
basically all of their assetsand it's just beautiful.
It's the perfect situation todo this.
(17:56):
But your client has tounderstand they are losing
control and they are losingbenefit of their assets.
All right, so that's when ourwhen not to use the eerie vocal
trust.
So please don't put families ina bad situation if you've
created this trust and theydon't have the assets to get
(18:17):
through five years or Some Joeblow told them oh, you got to
either get a divorce or do aneerie vocal trust.
Generally, both of those areBad ideas, except under very
specific situations.
And so the irreversible assetprotection trust that's when to
use it, when not to use it.
(18:38):
If you agree with me, I wouldlove to hear from you.
If you disagree, please let meknow please if I've missed the
boat on something.
I am absolutely open to here.
I would love to Learn.
I don't think I know everything.
I'm just telling you what Iknow and I am very open to
learning new things, so if youhear something on this podcast
(18:59):
or any podcast that you don'tlike, hey, let me know, be
polite about it, let's talkabout it, let's converse and
teach me something.
Okay, thank you so much forlistening.
Truly, do appreciate it.
Please subscribe if you haven'tShare with your friends and if
you would like to do well to lawIntensely and do it well.
(19:22):
I Would love to be your coach.
Give me a year and I can makeyou a pretty good out of law
Attorney.
Okay, thank y'all very much andwe'll see you next time.
Speaker 1 (19:31):
Thank you for joining this episode of the Elder Law
Coach podcast.
For those eager to take theirelder law practice to new
heights and are interested inTodd's acclaimed coaching
program, visitwwwtheelderlawcoachcom.
With Todd Wattley by your side,the journey to becoming an
elder law authority has neverbeen more achievable.
Until next time, keep learning,keep growing and stay
(19:56):
passionate about elder law.
You're tuning in to the Elder Law Coach podcast, the
definitive resource forattorneys delving into the world
of Elder Law, with your host,todd Watley, a certified Elder
Law attorney, past president ofthe National Elder Law
Foundation and renowned coachwith a quarter-century of
specialized experience.
Whether you're an establishedattorney looking to refine your
(00:24):
expertise or an emerging lawyerseeking a successful foray into
Elder Law, this is yourmasterclass.
Now let's get started with theluminary in the field.
Here's Todd Watley.
Speaker 2 (00:37):
That's right.
This is the Elder Law Coachpodcast and, as always, I'm
super happy that you arelistening and thank you so much
for downloading.
This thing seems to be growing.
As soon as I put one up, I'mgetting quite a few downloads,
and that always makes me happy,and I would love to hear from
you.
So if you do have ideas,suggestions, comments,
(01:01):
complaints, gripes, hey, I'mopen.
Please email me at Todd attheoddlalkoachcom.
I would love to hear from youjust to know if I'm doing it
right or not, and definitely, ifthere is a topic that you want
me to talk about, I would loveto hear that.
(01:22):
So, as with most of my podcasts,they come from things that
happen.
I am still a practicingattorney.
I see things all the time, anda lot of times the podcasts are
created from situations that Isee and have to deal with, and
so today's thing is I washonestly surprised that I had
(01:45):
not done a podcast on it,because this is one of the most
major things we do as elder lawattorneys, and I don't do a lot
of them, and you'll see why onceyou get to the end of this
podcast.
But the Irrevocable or AssetProtection Trust is a tool that
we can use and I see it misusedso many times.
(02:10):
You know, a lot of times,particularly non-elder law
attorneys, if they're dealingwith someone with some assets
worried about nursing home care,it's like, oh, we do an
Irrevocable Trust, assetProtection Trust that'll protect
the assets.
Well, yeah, but you can cause awhole lot of problems, and so
(02:30):
today's episode I want to gothrough and walk through this
process with you of number onewhat it is, give you a quick
definition of the AssetProtection Trust that is
commonly used when it's notappropriate and then when it is
appropriate, and hopefully youcan learn from this and not put
(02:52):
some people in some badsituations or not miss out when
it could be done for some folksthat truly do need it.
So let's start out with the when.
Well, let's begin with what itis, okay.
(03:12):
Number one the Asset ProtectionTrust is typically the
Irrevocable Trust that we createwhen someone is wanting to
protect their assets fromMedicaid.
You do understand that whenthere is a transfer and that's
what this is we're transferringthe assets into a trust that you
(03:34):
definitely no longer benefitfrom, and typically I would
recommend that you no longercontrol when you do have control
.
There is some argument there bythe state that you could
control the trust so that itwould benefit yourself.
And there are some people whowill do an income only trust,
(03:55):
meaning that only the income iscountable, but it is countable
all the way up until the end.
So typically when I do anirrevocable trust, it is a trust
that my client no longercontrols, nor do they benefit
from, and if you'll make it thatclear and that concise, you can
make sure that the state willnot come back after it.
(04:16):
So that's number one.
It's a trust that can holdassets that will be protected
from Medicaid but since it is atransfer, you are losing control
and benefit of that asset there.
It is subject to the five-yearlook back and therefore Will
(04:39):
cause a problem if you do itinappropriately.
So let's talk about the Caseswhere it's not appropriate.
It is not appropriate for lowasset cases.
Yes, someone may come to youand say, hey, I've got a home
and some land and a little bitof money and I want to protect
it from Medicaid.
Well, I understand that, butnot having the assets to get you
(05:03):
through that five-year lookback is a problem.
And Even if this person isn'treally good health and you're
almost absolutely sure they canmake it.
I am still very cautious aboutputting someone into an Asset
protection trust if we don'thave the money to get us through
those five years and and therules with returning a gift are,
(05:29):
you know, basically thwartedwith this trust and I'm in
Arkansas, as you probably know,and they are very particular
that, yes, you can return a giftand the portion that you return
will reduce the gift amount,but it is absolutely mandatory
that the person who wouldreceive the gift has has to
(05:51):
return the gift and if someoneelse returns the gift to replace
that gift, that is notConsidered a return of the gift
and therefore does not reducethe penalty.
So if you put an asset into thisirrevocable trust that Cannot
give assets back to the grandtour they are not the
(06:12):
beneficiary of this trust youwould be violating the terms of
the trust.
If you gave assets directlyback to the grand tour In a
state like mine, you would notreduce the gift.
So therefore, once you put itin there, you're stuck.
Okay, you can't undo it.
And the way that I do this andit's a huge selling point is
(06:34):
people think when you mentionputting your assets into an
irrevocable trust, they thinkthat you're doing it, that
you're putting all of theirassets in there and definitely
you're not you really do need tokeep out enough money to pay
for five years.
And so, basically, just takeyour average nursing home cost
today and I know this isn'taccurate, but chances are
(06:58):
they're not going into thenursing home the day after you
do this, but run the numbers asif they did today's cost minus
their income Means thedifference they would have to
pay out of assets to get theminto the nursing home.
Multiply that by 60 and sotherefore, that's the lump sum
(07:18):
that someone would need to getthem through a five-year look
back.
Well, that's going to be a fewhundred thousand dollars.
So therefore you don't put afew hundred thousand dollars in
there, which means you have tohave Many more than a few
thousand dollars to put into thetrust to make it worthwhile.
(07:40):
So that's why one of the youknow cases where this is not
appropriate is the low assetcases, and when I say low assets
, as a very general rule notcounting the house we're talking
about half a million dollars,because you're going to need
some money to pay for thenursing home Through those five
(08:02):
years and your client reallydoesn't want to be broke for the
rest of their life.
They need some money so theycan go do things.
They don't have to go beg thekids for money.
So generally I will keep outtwo or three hundred thousand
dollars at least so that thefamily or the couple your client
has money to survive.
(08:22):
And if they did have to go intothe nursing home for the next
five years they would have moneyTo pay it.
Okay Now, obviously that thereare exceptions to this, and and
one of those is the big familyfarm and I'll cover this more
under where it's for.
But you know there are going tobe some exemptions to this and
(08:46):
exceptions, but the family hasto understand this and take this
into account.
The next situation is If youknow the person's going into the
nursing home within five years,it's not that you can't do this
.
Trust, if they have a lot ofmoney, sure you want to stop the
bleeding.
(09:06):
At five years and having two orthree million dollars, this
still makes sense, even thoughthe person is going into the
nursing home today.
Let's put it in there.
That's congress's Agreement tosay, hey, look, if, if you'll
pay for five years, we'll payfor Anything after that.
So sure, if someone's goinginto the nursing home.
(09:30):
It's not that the trust neverworks, but it's rare that they
have enough money to get themthrough five years and then
still enough money, still haveenough money for this trust to
work.
So the other thing is, you knowjust if, if they're in perfect
health, that amount that youkeep for five years can be
(09:52):
reduced because you're likechances are they're not going to
go in for the next year or two.
So all of this is very general,but I just don't want you to
think, oh, this person has someassets they've asked me about an
irrevocable trust, so let's doit.
It's just truly not appropriatein those situations.
The last situation which reallynot appropriate is the tax hits
(10:16):
going to be so major is if that, if basically all of their
assets are in IRAs or qualifiedmoney.
When it's in qualified money,that money's never had taxes
paid on it and therefore for usto put it into this irrevocable
trust, that is going to be ataxable event.
They're going to owe taxes andonce you get north of $450,000,
(10:39):
$500,000, you're at the veryhighest tax bracket of about 40%
federal tax and whatever yourstake tax is.
So you're easily pushing a 50%tax to get this IRA to be
protected and when you startlooking at enough money to put
into this trust and make thisworthwhile, your tax bill is so
(11:03):
huge they've got to be in thenursing home, they've got to
benefit from Medicaid by beingin the nursing home for a really
long time.
It just doesn't make sense andso it is depressing.
These are great when you'reyoung and putting money, it's
like, hey, I'm not paying taxeson this.
But man, when you get owed anda client comes into you, they've
(11:25):
seen, perfect, there's a homeand some extra land, and they
have $600,000, $700,000,$800,000, you're like, yep, this
is a great, irrevocable case.
And then you look at thefinancials and 700 of the 800 is
in IRAs.
You're like, ugh, this is notgoing to work.
It's just sad, you know.
(11:46):
And you just tell them look,this trust is just simply not
going to work for you and Ihonestly don't know how we're
going to get you onto Medicaidbecause most of your money has
never been taxed and this isgoing to be a problem.
Okay, so the dreaded IRAs.
So when is the irrevocabletrust appropriate?
(12:08):
Obviously, the largest states.
Okay.
When you have someone coming inwith two, three, $4 million and
it's not in IRAs.
That's a perfect case.
You know your.
You know Congress fusses at usevery time they start looking at
the Medicaid expenditures andfussing.
(12:30):
It's like you got lawyers outthere putting millionaires on
Medicaid.
Well, yeah, we're doing itbecause y'all make the rules and
this is one of those situations.
I'm not a huge advocate of this, but you can and it's our job
to do what our clients want,following the rules.
And if they have three, $4million and they're willing to
lose control of it and losebenefit of it, this trust makes
(12:54):
total sense for them.
Just know, keep out enoughmoney to pay for the five years
If they need it.
Don't get them completely broke, but you can get them in a much
better position five years fromnow for getting their care paid
for through Medicaid than theyare now.
(13:15):
All right, this is always a fun.
Second case is where there's afamily form and there's not much
else.
And you know I did mentionabove, if there's not enough
money to get them through thosefive years, this is a problem.
Well, if that's just, if it'sjust real estate and not much
else, you know, just do somekind of payable on death deed on
(13:40):
the house.
Try to protect the house fromprobate, get it to the kids at
death and you're done, or youknow where they can sell it or
do something with it.
And dealing with the familyfarm that's been in the family
for generations, they absolutelywant to protect it, and
particularly if the parentsdon't live there anymore.
(14:00):
They own it, but it's not theirhome.
It's a countable asset, allright, and so this is where the
irrevocable trust comes in.
And so some of you out there waslike, well, you could add their
name to it as a joint owner andthen it would not go through
probate and under many Medicaidrules, if it's jointly owned
(14:21):
with a right of survivorship, itis a non-countable asset, that
is true.
But when you add someone's nameto it, you're going to lose
part of your step up in bases,and many times that's important
with this farm it's like, well,they may never sell.
Okay, if they're never going tosell, then yeah, putting their
name on it is a much cheaperoption.
(14:43):
But you just don't know.
You just don't know what thefamily is going to do Once your
client passes away.
What if there's huge pressureto sell?
They don't want to keep itanymore?
There's going to be a capitalgains issue.
That's easily avoidable withthe irrevocable trust.
A really good situation for theirrevocable trust, the asset
(15:05):
protection trust, is when thereis this piece of land that the
family really wants to keep,even if there's no money.
You just tell the kids look,y'all've got to either take care
of mom and dad at home for ascheaply as possible or, if they
go into the nursing home, y'allgot to pay.
That's your investment toprotect this farm and get it to
(15:27):
pass to you without Medicaidtaking it, without losing your
step up in bases.
I mean this is going to be thebest way possible Because I'll
tell the client hey, this isgoing to be really cheap
long-term care insurance for you.
You're going to pay me for thistrust, which is $7,000, $10,000
.
Bye, your long-term care isgoing to be paid for by the kids
(15:52):
for the next five years andfrom the state from then on.
So it's well worth it.
The kids understand they'rewilling to chip in, hopefully,
and keep mom or dad out of thenursing home, or Chip in and pay
for the nursing home if they goin so they can keep this farm.
Here's probably the idealsituation where the trust comes
(16:14):
in.
And if you have someone in youroffice or a good friend who
sells long-term care insurance.
A really good scenario.
Just the teaming up of twothings is number one.
If these people are fairlyhealthy, not going into the
nursing home anytime soon, getthem a basic long-term care
insurance policy.
(16:34):
Calling your friend who's willsell them.
This policy can discuss that ifyou don't Get them a long-term
care policy for just five years,okay.
So look, we're gonna buy thisthing for five years.
At the end of Five years we'regonna stop it, because at the
beginning of the five yearswe're doing this irrevocable
(16:55):
trust, putting as many assets init as we can, and this way you
don't need to keep out the twoor three hundred thousand
dollars to get through the fiveyears, because the insurance
policy is going to pay for it.
Even make the kids pay for it.
Let the kids pay the long-termcare insurance, with the
understanding that if mom anddad need nursing home care, this
(17:15):
insurance policy is going topay and we get to keep the Form
okay or whatever is in thestress, whatever assets we put
in this dress.
And you put almost all of yourassets then, knowing that the
nursing home is paid for if theyneed it within the next five
years and then, after five years, drop the policy.
(17:35):
You don't need it anymore.
Okay, that's just the the idealsituation where you know it's
what the client needs.
They need insurance to getthrough these five years.
They have a tool that you'recreating for them to protect
basically all of their assetsand it's just beautiful.
It's the perfect situation todo this.
(17:56):
But your client has tounderstand they are losing
control and they are losingbenefit of their assets.
All right, so that's when ourwhen not to use the eerie vocal
trust.
So please don't put families ina bad situation if you've
created this trust and theydon't have the assets to get
(18:17):
through five years or Some Joeblow told them oh, you got to
either get a divorce or do aneerie vocal trust.
Generally, both of those areBad ideas, except under very
specific situations.
And so the irreversible assetprotection trust that's when to
use it, when not to use it.
(18:38):
If you agree with me, I wouldlove to hear from you.
If you disagree, please let meknow please if I've missed the
boat on something.
I am absolutely open to here.
I would love to Learn.
I don't think I know everything.
I'm just telling you what Iknow and I am very open to
learning new things, so if youhear something on this podcast
(18:59):
or any podcast that you don'tlike, hey, let me know, be
polite about it, let's talkabout it, let's converse and
teach me something.
Okay, thank you so much forlistening.
Truly, do appreciate it.
Please subscribe if you haven'tShare with your friends and if
you would like to do well to lawIntensely and do it well.
(19:22):
I Would love to be your coach.
Give me a year and I can makeyou a pretty good out of law
Attorney.
Okay, thank y'all very much andwe'll see you next time.
Speaker 1 (19:31):
Thank you for joining this episode of the Elder Law
Coach podcast.
For those eager to take theirelder law practice to new
heights and are interested inTodd's acclaimed coaching
program, visitwwwtheelderlawcoachcom.
With Todd Wattley by your side,the journey to becoming an
elder law authority has neverbeen more achievable.
Until next time, keep learning,keep growing and stay
(19:56):
passionate about elder law.
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