As you start planning your estate, you will want to start thinking about future healthcare costs. While you may still be in good health now, you may reach a point where you can no longer take care of yourself. Planning for the future can prepare you for the high costs of nursing homes.
According to a 2018 survey by Genworth Financial, a private room in a nursing home can cost on average $8,365 per month. Most people use Medicaid to afford the care they need. But Medicaid has strict qualifying standards for income and assets.
When you apply for Medicaid in Texas, the state will expect your income to be low and for you to have few assets. But a good estate plan will have options to protect your assets while qualifying you for Medicaid. One option available to you is an irrevocable trust.
What is an irrevocable trust?
When you set up a trust, you create a new entity that holds your assets. You can either set up a revocable trust, where you can take the assets back out at any time, or you can set up an irrevocable trust.
With an irrevocable trust, you cannot set up the trust and then take the assets back out. Instead, when you set up the trust, you include specific rules that state how the trust will pay out to its beneficiaries.
How does an irrevocable trust protect my assets?
Since an irrevocable trust is its own entity and you don’t have direct access to the assets inside it, the state will not consider those assets as yours. You won’t have to give all your assets directly to someone else. Instead, the trust will hold them. When you set it up, you make the rules for how the trust pays out to its beneficiaries. You can even have it pay you a monthly income below the Medicaid limit.
An irrevocable trust is just one of many options you have to protect your assets. When you plan for your future, you should start early and learn all the options you have. An attorney can help you understand what will work best for your life and when you should start setting up things like trusts.
An early plan will give you the best chance to protect your assets.