Revocable Trusts Do Nothing to Protect Assets from Long Term Care

If you own assets in a revocable trust and you need long-term care in the future, please understand that those assets are EXPOSED to pay those long-term care bills out of your own pocket. Revocable trusts WILL NOT PROTECT your assets from long-term care expenses. If you were told that your revocable trust will protect you from having to “spend down” the assets held in that revocable trust upon the need for long-term care, you were MISLED or INCORRECTLY ADVISED.

I wanted to make sure not to bury the lead in this post. Unfortunately, we have had many conversations with prospective clients over the years that have gone like this:

Prospective Client: “My parents sent up a revocable trust 15 years ago, and their house has been in that trust all this time. Since the house is protected, how can we protect any of their other assets going forward?”

I always begin my explanation from the unenvious position of having to inform them not even the house is protected at this point.

Prospective Client: “But what do you mean? There’s a 5-year look back and they transferred the house even longer ago (15 years to be exact).”

Once again, I’m left in the uncomfortable position of telling this individual that the 5-year look back has not even begun yet, because those assets—that house in particular—is still owned by the parents and is IN NO WAY PROTECTED FROM A MEDICAID “SPEND-DOWN”.

When you establish a revocable trust, you have the option of “revoking” the trust, or in other words getting rid of it at any time and putting the assets back in your individual name. Another important note about revocable trusts is that the person or persons who set up the trust (known as the Grantor(s), Settlor(s), Trustor(s), depending on the terminology used in the trust) are also the primary beneficiaries of the trust while they are still living. 

To put it another way, the assets in the revocable trust can be given back to the person(s) who established the trust at any time, for any purpose, under any circumstances.

Because of that unfettered access to the assets in the revocable trust, there is no plausible way of denying that you can use those assets for your own benefit. And whether that is a good reason or bad reason for needing it for your own benefit, you are stuck with the same result—it’s still yours.

It does not matter how long the revocable trust has been established and how long the assets have been owned in the revocable trust’s name. Whenever you need nursing home care, and the private monthly bill is $14,000 per month, the assets in the revocable trust are subject to being spent down privately on that care, until such time as your assets are depleted to the point of qualifying for public benefits.

This may be one of the most important reasons you owe it to yourself and your family to seek an experienced Certified Elder Law Attorney through the National Elder Law Foundation. As a Certified Elder Law Attorney* myself, I regularly counsel prospective clients on legal strategies that actually accomplish their goals of protecting their assets from potential long-term care expenses in the future. No magic pill or secret tricks. Just effective legal planning concepts that can be used to help you come out ahead.

We understand the 5-year look back. We understand the concern of risking everything you worked for over the course of your working years. We understand the potential for the State to recover your house through the Medicaid Estate Recovery program if you wind up in a nursing home and on Medicaid benefits.

And most importantly, we understand that these are questions you have that keep you up at night, and very rarely, if ever, do you know where to turn to get these questions addressed and answered.

If you have a revocable trust and have spent all this time thinking you were already protecting your assets, or if you have had this concern but haven’t known where to turn, give our office a call and schedule your own complimentary, confidential consultation.

 *As authorized by the National Elder Law Foundation and approved by the Pennsylvania Supreme Court.