What is a Medicaid Trust?

Video transcript:

Michael Levitis  00:00

Good day, everybody. This is Michael Levitis, from Jurisq.com, with Irina Yadgarova, an estate and elder law planning attorney. And we always talk with Irina, regarding how to plan for your retirement, how to get yourself affordable and even free healthcare in the form of Medicaid. And we talked at our last session about how to qualify for Medicaid. And from what I heard, I was shocked. It is very hard to qualify for Medicaid. In New York, if you are a working couple or working individual, if you used to work in the past, if you have any kind of even a home, really explain to us that Medicaid can give you Medicaid but then once you pass away, they will take away from your inheritance basically, from your kids or whoever else, you leave your your state to take away all these expenses. And as I mentioned, expenses could be tremendous. Like nursing home isn’t what it could be $13,000 a month.


Irina Yadgarova  01:10

If it’s a nursing home situation, they place the lien during your lifetime, they don’t wait till you pass because you don’t need to come back home, you don’t you know, you don’t need them anymore. It’s no longer exempt.


Michael Levitis  01:18

So that means great, your parents, they had all this free Medicaid, but then once they pass away, you thought you’re getting the home the house, well guess what there’s gonna be nothing left with after state puts in their claws into it, and takes back what they paid for Medicaid. So as you explained before, there is a way to legally get Medicaid from Medicaid Trust, which is approved for Medicaid and you as an attorney disclose everything to Medicaid, what exactly you’re doing, what is the purpose, and as a way to get free health care upon retirement. So let’s get into that. Okay, what is a Medicaid trust? How does it work? What are the benefits? What are the drawbacks? In a nutshell? What is it?


Irina Yadgarova  02:15

So I think you’re referring to you’re referring to the Medicaid Asset Protection Trust, which will protect your assets, including your home. Okay, just want to say one little note that usually people need another type of trust to for their income portion, right? Because if they have to, that’s a full trust. We’ll talk about that separately. But right now, we’re talking about protecting your assets, which include your home, right or your homes, if you have multiple properties. So an asset protection trust, what you’re going to transfer into this asset protection trust, can include your home, it can include liquid assets, securities, and depending on your specific asset composition, will advise you as exactly what should be put in. If you’re a homeowner, and you’re 55. And up in New York, it’s a no brainer, you should transfer your home into the asset protection, trust and well, most instances, right. So the way it works, the way it works is it’s an irrevocable asset protection trust. And it has protection against all creditors, including Medicaid. The reason it has creditor protection is that you are alienating, you’re agreeing that the principle the value of what you’re putting into the trust, you are no longer going to use for your personal expenses, okay, but really changes nothing, because you can still sell the home right, the trustee will sign the contract of sale, you just cannot use the money upon the sale for personal expenses for your credit cards for your shopping spree for your you know, Vegas gambling for gifting. But you can purchase any property in the name of the trust, whether it’s another real property that you want to live in anywhere in Florida and Israel and Panama wherever you could purchase another real property that you can use as for rental income, because everything income is going to be yours. This trust is treated what we call a grantor trust under the IRS rules, which means ignored for tax purposes. And that’s wonderful, because since it’s treated, not treated as a separate entity, when your children inherit it, they will not pay capital gains tax is appreciated and valued, super important.


Michael Levitis  04:30

Oh, wow. That’s an extra benefit that you get from this trust.


Irina Yadgarova  04:34

Absolutely. And you don’t have to add any trust, right, including this one. Your children will not have to go through the onerous and expensive probate process dealing with the will or no will administration even more onerous and even more expensive. So you definitely get the creditor protection you get to avoid probate or any estate administration proceeding. So it’s a clean quick transfer. Upon death to children without court intervention without notices to people, you know, it’s it’s private, it’s confidential. Really there are no. So this is what we do for 55. And what are the drawbacks? Right? People want to know what withdraw because it sounds great, right?


Michael Levitis  05:14

Let’s summarize the benefits. So basically benefits are Medicaid. Right? You protect your assets against creditors, right, any judgments, people phone, you, whatever.


Irina Yadgarova  05:28

You got to do advanced planning.


Michael Levitis  05:32

Right. Third, you avoid a costly and drawn out probate process, because when somebody dies with just the will to go to special court, I believe it’s called surrogate court. And that costs money, it takes time with with a trust, the inheritance passes much easier, right? That’s the third benefit. And fourth, you mentioned the tax implications. So that when the way the home is valued upon sale of his home, you’re going to pay less capital gains,


Irina Yadgarova  06:06

I’ll explain that very specifically, when you purchase a home, let’s say you purchase it at $200,000. Okay, at the time of death, the fair market value is $500,000. If they inherited through a trust, right, not you didn’t, you didn’t transfer their name, you didn’t put their name on the title, you didn’t do a direct transfer, you put it in the trust and as to be correct trust, right. There’s different types of the revocable trust, we’re talking about. This one specifically that suits most individuals. That’s why it’s important to have a qualified and an experienced attorney during your trust, do not go on LegalZoom.


Michael Levitis  06:39

that by the way, we’re gonna have a separate session on that, why you should use an attorney at great trust, not create, through online services, we’ll talk about that.


Irina Yadgarova  06:47

And also the right type of attorney because people call me all the time with the I don’t practice family law, you know, I’m not gonna get into, you know, what, I have no experience or knowledge on immigration and all that. So, you purchase a 200,000, the fair market value times 500,000, your children get it through this type of a trust, they sell for 500,000. They do not pay any extra tax. One more really important part about this being ignored for tax purposes, say you’re 70 you’re a New Yorker, you have the homeowners tax exemption of up to 50%. And the property value, we can speak about that later. But if you qualify for that this type of trust properly drafted, properly drafted, new deed will not result in the loss of any tax benefit. You are currently receiving star homeowners exemption, all of that.


Michael Levitis  07:39

Yeah, great benefits. Okay, fine. We talked about the benefits now tell us other any minuses, any drawbacks that people should be aware of when creating a Medicaid trust.


Irina Yadgarova  07:52

So this is one reason I do not recommend this for younger individuals is you’re losing the flexibility, like we said, to use the money for your own expenses. And if you don’t know where to be where you retire, you know, maybe you do need to sell your home and supplement your retirement income, you know, for whatever expenses you have. So that’s one that’s very rarely applicable to seniors, because the only time they really typically need supplemental income is for medical care. And this is the whole goal right to get ahead.


Michael Levitis  08:26

At what age you recommend to plan for your Medicaid Trust,


Irina Yadgarova  08:36

The further up you get to 55 and up the date. The older you get, the more there’s a need and it becomes a critical need. Because there’s a five year look back for nursing home coverage. So you can’t wait too long and you don’t want to start too early. Right?


Michael Levitis  08:49

You definitely want to apply at least five years before you plan.


Irina Yadgarova  08:53

You want to have the trust in place five years in advance of a permanent nursing home meet absolutely very important. Okay. And the other drawbacks are really really important also usually for younger individuals is refinancing is difficult with this type of a trust okay, you have only certain lenders like Quantic bank like literally one or two lenders that will lend against this type of trust not for home equity only for refi it still get home equity without any issue. So for refi guys, you know, if you think you’re going to refinance, do the refinancing first and then although in this environment now with the rates climbing


Michael Levitis  09:29

Yes, it’s so it’s so important, so vital to go to an attorney that does this every day. And that’s all you do. I understand. Because you know, all these new nuances and details. What are the process and it’s also important to know about the minuses and work around these minuses so you’re prepared for all life is gonna throw at you 100% Yeah, okay, very good. Perfect. Okay. Irina, thank you so much. This was very informative. We appreciate your time and And of course, if anybody has questions on their particular situation, because right now, I really is giving general advice. If you are talking about your particular situation, it’s best to call Irina directly the phone number at the bottom of the screen. Also, we’re going to tag everyone in this post with her Facebook profile. And you can contact me there as well to schedule a consultation. And please stay tuned, because there’s so much to cover. And this applies to everybody. I don’t care if you’re rich or poor, how old you are, you should always because even if you’re young, you’re in your 20s, 30s you have to think about your parents and maybe you want to tell your parents about what you heard, and saw in this video because they’re gonna be affected. And guess what, you’re also going to be affected. So stay with us. We’re going to bring you much more I appreciate your time. Take everybody until next time.


Irina Yadgarova  10:55

Thank you. Bye. Thank you