Living trusts, referred to as lifetime trusts, avoid a court proceeding upon death called probate, saving time, money and avoiding family squabbles.
Other advantages of trusts include disability planning and privacy, that is, keeping your financial and estate planning affairs out of the public eye.
For married couples with assets in excess of the estate tax exemption amount of about $5.5 million, trusts may also avoid or reduce estate tax liability.
In addition, the irrevocable trust called the Medicaid Asset Protection Trust (MAPT) also protects assets from nursing home costs after five years.
Revocable living trusts do not protect assets from nursing home costs.
A common concern among those who create living trusts is, “What happens if I move to another state?” And the answer depends on which type of trust you have – revocable or irrevocable
Revocable trusts are usually “portable.”
When you move to a new state, the laws and rules of that state now apply to your New York trust.
So, nothing needs to be done.
However, the language in the trust describes this portability feature, so the trust must be reviewed to confirm the portability benefit.
Although you may move to another state with the irrevocable MAPT, the “portability” of the trust is not automatic, and may not apply. Under federal Medicaid law, there is a five-year “look-back.”
If you have given any assets away in the past five years before applying for Medicaid to pay for your care in a nursing home, you receive a “penalty period,” meaning you must self-pay the nursing home before Medicaid will pay.
Transferring your assets to the MAPT would also result in a penalty period if you apply for Medicaid before the five years has lapsed.
In New York, we have crisis planning tools that can save money when applying for Medicaid in a nursing home, even if you have given assets away or transferred assets to the MAPT in the past five years, or if you never did any planning to protect assets from nursing home costs.
For single applicants, the “gift and loan” strategy can save half of the applicant’s available assets from nursing home costs.
For a married applicant, with a spouse at home, “spousal refusal” allows the spouse at home to keep assets and “refuse” to pay the nursing home.
Not all states have the same laws as New York. If you created the MAPT and move to another state, you need to consult with an elder law attorney in the new state.
Although Medicaid is a joint federal and state program, it is administered by the states, and laws may differ.
If you move to a new state that does not have state estate tax, and you have included the estate tax savings language in your New York trust, the estate tax savings language is ignored.