Is an Irrevocable Trust an Available Asset For Medicaid?

There was an interesting case out of New Hampshire (Braiterman) recently where an irrevocable trust (asset protection trust) was pierced and all the assets inside of the trust were held to be available assets for Medicaid purposes.  Whenever cases like this occur, it is important to dig into the facts before jumping to conclusions, because laws and court decisions are determined by facts.

Family Law Attorneys Probably Should Not Be Drafting Irrevocable Asset Protection Trusts to Protect Against Medicaid and Long-term Care Costs…

I always first start with the trust and the attorney that drafts a trust.  Irrevocable trusts and asset protection trust are complicated legal tools that shouldn’t be utilized by lawyers that are not experts in them.  An attorney that does a divorce on Monday a basic will on Tuesday and doesn’t even list elder law or Medicaid planning on their website should not be using tools they do not understand for reasons like this case.  For example, the attorney that drafted the trust lists on their website that they:

“Our traditional practice includes domestic relations such as divorce, legal separation, child custody, child support, alimony and spousal support, pre-nuptial agreements, domestic violence and child abuse/neglect, guardianship, and adoption.  [Removed] Law Offices balances its traditional family legal services with a growing practice in probate, estate planning and elder law such as wills, trusts, living wills, powers of attorney for finances and for health care, and estate administration.”

The important take away here is that the attorney that drafted the trust was not a CERTIFIED ELDER LAW ATTORNEY.  Any attorney can say they do estate planning or elder law, but the Certified Elder Law Attorney (CELA) designation is the gold standard in estate planning and elder law.  You can have confidence knowing that if you’re working with a CELA, they have dedicated their practice to estate planning and elder law, they don’t dabble in this or dabble in that.

Why The Asset Protection Trust Did Not Work? Poor Drafting

In this case the family law attorney drafted an irrevocable trust for his mother, naming himself and his mother as trustees of the trust.  So far so good.  He did not allow access to principle.  Again, so far so good.  However he did put language into the trust that any money that is given to a beneficiary, the grantor “hoped” that the people who received the trust corpus would use it for her benefit.  Oops! That language doesn’t work in these types of trusts.

Don’t Rely on a Poorly Drafted Asset Protection Trust

For asset protection trusts and irrevocable trusts to work, they need to be properly drafted.  Each state has different laws and Medicaid rules.  Those rules need to followed. It is hard for clients to tell if an attorney has the proper knowledge in estate planning and elder law.  That is why designations like the Certified Elder Law Attorney (CELA) designation are so important.  It signals to the client that you are working with an expert in the area, not just an attorney that dabbles in estate planning and elder law.

Want to Learn More About Irrevocable Trusts and Asset Protection Trusts in Michigan?

If you want to learn more about asset protection trusts in Michigan, join us on our upcoming webinar August 30th, at 2pm where we’ll walk through how to set up an asset protection trust, what they are, and how they can protect your family from law suits and long-term care costs.  Register below.

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