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Skyrocketing nursing home costs? How to keep your home

It is an unfortunate reality that many seniors need to sell the family home to pay for assisted living services or to qualify for Medicaid. There could be a way to save your family home while ensuring that the right person inherits it.

Putting your home in a trust designed for Medicaid purposes could be the answer. However, you should carefully consider the benefits and drawbacks before pursuing this option.

What is an asset protection trust?

The asset protection trust is one of many tools available to an investor. It may not be possible to totally protect all assets but taking the time to prepare and establish a structure for asset protection can help your beneficiaries in the future.

In Texas, there are specific rules that must be followed for a trust to be a valid legal entity. By enlisting the help of an estate professional, you can set up a living asset protection trust to maintain some benefits in your lifetime while protecting the asset for your beneficiaries.

How can a trust help you with Medicaid?

If an asset, such as a house, is placed in a trust with the intention of using it for Medicaid purposes, you may not have to sell it to spend down your wealth. This may help you qualify for Medicaid and keep the house in the family.

If you choose to gift the house to a trusted person, the recipient may be subject to a gift tax as well as significant capital gains taxes from the gift. If the recipient should die before you or run into financial difficulty, they may need to sell the house.

Asset protection can be a tricky business. It is important to contact a professional to avoid Medicaid/Medicare fraud allegations, as well as errors usually found in do-it-yourself documents that could render the document invalid.

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