Does A Revocable Living Trust Protect My Assets From Nursing Homes?

One of the most repeated questions I hear in client meetings or at presentations is "Will a revocable living trust protect my assets from the nursing home?"

In the Medicaid Planning world, misinformation seems to swirl around the public.  It seems that many of the families I speak with were specifically told at a seminar that their revocable living trust would protect their life savings from the costs of long term care, and that they would not have spent the money on such a trust otherwise.

Unfortunately for these folks, the answer is No - a revocable living trust does not protect your savings from the cost of a nursing home!  Please make sure your loved ones are not letting their current planning documents gather dust thinking all is well when they may fall victim to this unfortunate misconception.

Revocable Living Trusts are not asset protection vehicles, because the creator ("grantor" or "trustmaker") generally reserves the right to change the document, to be the person in charge of the money ("trustee"), and reserves the right to access all the money or assets within the trust ("beneficiary).  When you fill all three of these roles and have the right to spend or transfer the assets within the revocable trust, you have full control...and when you have full control, you don't have asset protection.

In other words, think of the revocable living trust as a safe with the door broken wide open.  This is a revocable living trust.  you can put money or assets inside, and take them out.  You have full access to what is in the trust, and have full control over what happens to it.  Should you then need nursing home care, Medicaid will expect you to take some money out of the open safe in order to pay your monthly nursing home bill - as it should.

Only if you have an Irrevocable Trust designed for Medicaid planning purposes will you gain asset protection.  These specifically designed trusts are like a safe as well...but they have the door locked.  Since you cannot reach in and take the money out, you do not have full access.  As such, you are not considered the owner of the trust at this point and if done correctly, you have gained asset protection.

Caveat: Please see our posts on the "Medicaid Lookback Period".  Simply placing assets in an irrevocable trust is not a cure-all and can actually disqualify a Medicaid applicant from receiving benefits for many, many months if not done correctly.  There are significant matters of timing to consider and we recommend you seek out the guidance of an Elder Law attorney before proceeding.

Russell C. Golowin is an Elder Law and Estate Planning Attorney for families in the Central Ohio area.  He helps families navigate the puzzling maze of Medicaid eligibility while protecting their savings and ensuring proper care.  Call (614) 453-5208 or Visit his website for more information on how to qualify for Ohio Medicaid.