Monthly Archives: January 2011

How to Avoid a Nursing Home with a Pooled Trust

While baby boomers’ parents have been retired for years or even decades, their retirement income is no longer enough to pay for the rising costs of the long-term care that could keep them out of nursing homes.

Often times, children will do whatever they need to in order to keep their parents living in their own home, but it can be challenging, especially for middle-class families who can’t afford private home care. The other problem with these middle-class families is that often they will have too much income or assets to qualify for state-run Medicaid progra

ms. For these families, they are often faced with no choice but for their parents to enter nursing home facilities.

A Pooled Trust can keep a Senior in their Home

There is, however, a little-known way for people in certain states to receive home care through Medicaid without going broke. A federal law established in 1993 allows disabled people to put their monthly income or assets that exceed the Medicaid approved amount into a special type of pooled trust. That money can then be used to pay for basic monthly bills such as rent, cable television, or mortgage payments, while Medicaid pays for their home care.

For those who choose to create a Pooled Trust, it can make a huge difference. Each month, a person who has been deemed disabled can deposit their excess income into the trust, which must be run by a nonprofit organization. The trust will then pay the disabled person’s bills so long as the expense is for the sole benefit of the participant. Trusts can refuse payments on items that look questionable and money cannot be used for things like gifts to children or grandchildren.

It is important to note that signing up for the trust and submitting the bills each month will require a lot of paperwork, and it is entirely possible that elderly people will need to rely on a family member to help them. After a person dies, any money left in their trust will either be paid back to Medicaid or kept by the nonprofit organization that is running the trust.

The most important thing to keep in mind is that this type of trust may not be the best solution for everyone, or it may work as a strong component of a broader strategy. Consult a professional, such as an elder law attorney, to learn more about the different options available.

Reasons to Create an Irrevocable Trust


An Irrevocable Trust is a trust that cannot be changed once it is created, and once you transfer an asset into that Trust, you usually cannot remove it. They are used for very specific reasons for the most part, and some of these reasons are:

You want to protect assets from having to be spent on long-term care costs.

The average cost of nursing home care in MA is about $10,000 per month with three ways to pay for it: 1)long-term care insurance; 2)private pay (writing a check each month); or 3)Medicaid, the state and federally-funded program that pays for long-term nursing home care if a person is both medically and financially eligible. In order to be considered financially eligible, a person cannot have more than $2,000 in so-called countable assets, and to prevent people from giving away their assets in order to qualify for benefits, Medicaid imposes a period of ineligibility following the gratuitous transfer of an asset. The ineligibility period for giving away assets is normally five years from the date of the gift. For those who feel confident that nursing home care will not be needed for more than five years, transferring assets to an Irrevocable Trust can be an effective way to preserve assets for children.

You want to keep life insurance proceeds from being taxable in your estate.

Although the new federal tax law enacted on December 17, 2010 exempts estates valued at less than $5 million from federal estate tax, Massachusetts imposes an estate tax on estates valued at $1 million or more. One common estate tax planning strategy is to buy life insurance so the surviving family members don’t have to liquidate real estate or borrow money to pay the estate tax. While life insurance proceeds are not taxable income to the person who receives them, life insurance is a taxable asset in the estate of the insured if that person is also the owner of the policy. If instead an Irrevocable Life Insurances Trust (otherwise known as an ILIT) owns the life insurance policy, the proceeds are not part of the insured’s estate.

You want to make qualifying annual exclusion gifts to minors.

Many people know they can make annual gifts of a certain amount each calendar year to any number of people without estate or gift tax consequences. Currently, the annual exclusions gift is $13,000 per calendar year per person. To qualify as an annual exclusion gift, it must be a “present interest” gift, meaning the recipient must have immediate access to and control over said gift. Parents and grandparents may want to give gifts to minor children and grandchildren, but don’t necessarily want the child to have access to funds at a young age. There is a special type of Irrevocable Trust allowed under the Internal Revenue Code that addresses this issue, which means if the Trust is properly drafted; the gifts to the Trust will qualify for the annual gift tax exclusion. However, the beneficiary’s right to gain access to the funds is restricted until the beneficiary reaches the age of 21.

You want to protect governmental benefits for a person with disabilities.

Individuals with disabilities may be eligible for a variety of governmental benefits that provide income and medical care; many of these benefits are needs-based, which means that a person may not have assets in excess of the program limit in order to qualify.

These are just a few specific reasons why using an Irrevocable trust may be appropriate for a certain situation. Everyone’s circumstances are different, and in every case, it is important to consult with a qualified estate planning or elder law attorney to develop a plan that works.

A Few things to keep in Mind When Applying for Medicaid

Medicaid offers medical assistance for those in need, here are some instructions and tips on how to apply.


–Understand that the Medicaid program is run by the state and supports the medical expenses of people with a low income.

Have your attorney learn the qualifications for Medicaid by getting the qualification and document list to gather all the information you’ll need beforehand. You are qualified if you are receiving Supplemental Security Income (SSI), if you have medical expenses, and if you meet particular resource, income, disability, and age requirements.

Contact your local Human Services or Social Services Department. You can identify the agency because it provides financial assistance and food stamps.

–Get your Medicaid application, keeping in mind you may need to fill it out on the premises. If you have any questions regarding the application, ask somebody for help so you can answer accurately.

Gather the needed documents for the application. This may include proof of your age, like a birth certificate; proof of address in the form of a rent receipt; proof of your source of income like a Social Security card; bank account information like ATM cards, Medicare benefit card, insurance benefit card, driver’s license, and any other necessary documents. Consult your local County Department of Social Services because they can help you get all the necessary documents.

–Be prepared to answer inquiries regarding your finances and make sure all the facts and figures that you are planning to state are correct. If you answer incorrectly, your application can become void due to fraud.

Ask your family, friends, or attorney for help if you can’t leave your home and write an authorization letter indicating the permission of that person to process your application. You can also request an application to be mailed to your home.

If you need Medicaid planning, contact elder law attorney Adam Tobin.

A few Ways to Help Elderly Parents with their Finances

Helping parents with finances.As children begin to see their senior parents struggle with finances, it is important to understand how to help them without taking away their independence or getting into arguments over the issue. There are a number of different concerns that children may find when visiting their parents; bills haven’t been paid, papers are in a disarray, or even certain utilities have been cut off.

Child/parent relationships come in many different forms. Some parents are very open about their financial situations, allowing their children to participate in bill payment and investment decisions. Others have a much stronger sense of control for fear of losing their identity along with their checkbook, sometimes even suspecting their children of going after their money.

Here are a few approaches that have worked for children in the past:

–Offer to help with the bill payments. Allow parents to continue to control the checkbook, but schedule a monthly meeting to go through all the bills that have accumulated. If children feel better writing the checks out, allow the parents to sign them.

–Segregate accounts. By leaving the senior in charge of a family checking account, but taking control of investment accounts, this will limit the amount of risk to a parent’s entire estate.

–Make sure the parent takes care of estate planning while they are still competent. Through properly executed durable powers of attorney and revocable living trusts, children can have the option of stepping in when it is necessary.

–Use the Internet. Children can have access to online accounts, which allow them to monitor without taking full control. This way, if payments or transfers that seem out of the ordinary occur, children can step in quickly without waiting until their monthly meeting.

–Play with the parental responsibility. Children should bring up the idea of helping with finances as a way of easing their own minds, rather than as a response to the parent’s incapacity to handle them independently. This is something the parent is doing for the child, not the other way around.

–If all else fails, a child may need to seek a court appointment to become guardian or conservator over the parent’s finances. Though this will give them total control, it will remove the parents’ right in making any legal or financial decisions. It also involves legal costs, period reporting to court, and, in some cases, long-term care planning steps that could be carried out freely under a durable power of attorney or revocable living trust.

If one option does not work, try another. There is no single right answer and it may be necessary to try a few different options before finding one that works. To find out more about Massachusetts Elder Law, contact a knowledgeable elder law attorney like Adam Tobin to review all available options.