Protect Parents’ Assets
Categories
As parents age, the risk of health problems grows. The Sandwich Generation—those caring for both their children and their parents, may experience the stresses and expenses of elder care, and then more issues later with probate of a deceased parent’s estate if no advance plans are made.
One of the assets that can cause problems on several levels is a home. Although primary residences are normally exempt in Medicaid eligibility, if not planned for, the home may have be sold to pay back at the state when the homeowner dies. (Read more about exempt and non-exempt Medicaid assets.) Instead of giving a house directly to children—and managing tax issues that may develop with such a transfer—Medicaid trusts allow an individual to benefit from assets held in trust while at the same time remaining eligible for public benefits. These tools offer an alternative: The home is no longer owned by an elderly parent, instead the home’s title is held in trust and protects the house for the children.
What if a parent accrues significant medical bills later in life and liens are placed on their home? The property could be sold to pay off creditor claims and surviving children may not receive the sentimental or financial legacy the parent intended to leave them. However, properties held in irrevocable trusts are exempt from creditor claims.
If the irrevocable trust is structured properly, surviving children can remain beneficiaries of the trust. This would ensure that if a judgment or other claim was made against one of the surviving children, the home would still remain sheltered from claims. Also, the process of a house passing to beneficiaries through a living trust is simpler and less expensive than passing through intestacy or through a Will. This makes it easier for surviving children to sell the house quickly after the death of the owner.
