estate planning documents

When my dad was diagnosed with Parkinson’s, my parents were living in my childhood home in Wilmette, and they had a modest life savings.  In the course of sharing my dad’s diagnosis with friends and family, one thing they kept hearing was how expensive Long Term Care would be; the cost could completely drain their life savings, and they could eventually lose their house.  

Anxiety struck; my parents didn’t want to lose their house, and they were hoping that they might be able to leave something to us kids from what they had spent a life building, as an inheritance.  Of course helping our parents or taking care of them in old age wouldn’t even be a question for me and my brothers, but my mom was plagued with the notion that she would be a “burden” to us one day. 

Today, both my mom and dad have peace of mind that they won’t have to rely on us.  My father is in Long Term Care at the Carrington of Lincolnwood, with 100% of his care paid for, and my mother is still living in Wilmette off of their life savings. 

How did they get from anxiety to peace of mind?  With an Irrevocable Asset Protection Trust. 

Irrevocable Asset Protection Trust

The basic structure of a Medicaid Plan works like this.  Medicaid will pay for Long Term Care costs as long as the applicant has assets below a certain threshold.  If a person tries to give away money or assets, such as giving money to their children or transferring real estate to a relative, Medicaid considers that a transfer to purposely fall below the asset threshold to qualify for Medicaid.  When someone applies for Medicaid, Medicaid looks at all transfers made in the 5 years, scrutinizing every transaction to determine if any money was given away in this manner. If it finds any money was given away, Medicaid imposes a penalty period before it provides coverage, leaving the applicant to pay out of pocket for months or even years before Medicaid will kick in.  But with what money?  The applicant has already given their money away… 

However, if someone makes a transfer of their assets prior to the 5 year lookback period, Medicaid can’t impose a penalty period.  This is where our Irrevocable Asset Protection Trust strategy comes into play.  By transferring assets into the Irrevocable Trust, and then waiting 5 years, Medicaid can only consider assets outside of the trust to evaluate an applicant for eligibility.  By sheltering all major assets, a person can protect their home and their life savings, while Medicaid pays their Long Term Care costs.  The money is available to the person in Long Term Care above what Medicaid provides.  I love the term for this that some people use: a “dignity fund.”  If the money outlasts the person in long term care, it is preserved as an inheritance for their family. 

My parents’ specific fear was that my mom would die before my dad, leaving him with assets above the threshold for Medicaid coverage, and he would be forced to liquidate everything to pay for long term care costs, leaving the children with nothing, and depleting what they had spent a lifetime building in a matter of months. 

If your parents are in the same situation as mine, or if you have a parent at risk of something like Parkinson’s, Alzheimer’s, or strokes, contact us here or give us a call and let us help your parents and family find peace of mind like mine did.