Case Study: How an Irrevocable Trust Protects Assets from Nursing Home Costs
Last week I met with “Jennifer”, whose mother “Sally”, a long-time client of our office, had entered a nursing home several years ago. (Their names have been changed.) Two months ago, Sally died. Though always a sad occasion when a parent passes away, I told Jennifer that she should take comfort in knowing that she was there for her mother when she needed her most.
One of the ways that Jennifer had made Sally’s final years more comfortable was having urged her years ago to engage in estate planning, an important element of which involved taking actions to prevent all of Sally’s life savings from being spent on the nursing home. The technique that I had recommended to Sally, and which she implemented, was the transfer of a portion of her assets to an Irrevocable Trust.
When Sally eventually required nursing home care, the assets in the Irrevocable Trust did not need to be spent down in order for her to qualify for Rhode Island Medicaid benefits. Instead Jennifer was able to use the protected assets to pay to hold Sally’s bed in the nursing home during those times when Sally needed to go to the hospital for an extended period. And since Sally, like most Rhode Island Medicaid recipients in nursing homes was only allowed $50 per month for personal needs, Jennifer was able to pay for those extra things which Sally wanted but which she could not otherwise afford.
At our meeting, Jennifer reported that there was still some money—not a fortune, but some–remaining in the Irrevocable Trust. I advised Jennifer that, as Sally had specified in the Trust, that balance could be divided between herself and her sister. Jennifer was pleased with this, not so much for herself, but because she knew her sister could use some extra money with a child in college.
In the 25 years in which I have been privileged to represent clients like Sally and counsel their adult children like Jennifer, I have seen this result many times. It provides a significant measure of consolidation—and justified satisfaction– to sons and daughters like Jennifer to know that because they encouraged their parent to do planning, that not all of their father or mother’s life savings needed to consumed by nursing home costs.
And it is never too late to do this planning. At initial consultations, clients often lament that “we should have do this years ago”. I discourage this thinking, because I have seen many times positive outcomes like that of Sally’s which have occurred even when the planning has begun later in life.
Comments on this post are closed.