Do generation skipping trusts have to be put in effect five years in advance?
My dad is getting older and his health is failing. I am an only child w/ a child of my own. I know very little about transfer of property but I do know that you have to "sell" the land to family at least 5 years before being admitted to assisted living (or something like that) but does a living trust or generation skipping trust have to be put into effect that far in advance too? I live in the state of KS.
You are referring to ways to protect property from being spent down once someone is on Medicaid. To be eligible for Medicaid in Kansas, the applicant's assets cannot be above $2,000. This includes all liquid and real property. (These rules are for a single person. If you Dad is married, the rules are different.) The easiest way to protect property is to "gift" it to someone else. However, at the time of Medicaid application, the case worker will "look back" 5 years to see if any gifts were made. If so, the applicant will be penalized for those gifts. The amount of the penalty is determined by dividing the total amount of gifts during the prior 5 years by the average monthly cost of nursing home care in your state. In the case of Kansas, the cost is about $4,210/mo. This calculation determines how many months Medicaid will not pay for your father's care after his assets have been spend down to $2,000 or less. So, if you are going to make gifts to a trust, 5 years need to go by before the gifts are untouchable by Medicaid. If your father needs Medicaid in less than 5 years, a penalty will be calculated. If you use a trust, it must be an "irrevocable trust" to completely remove the property from the grantor's ownership. A living trust does not do this. A "sale" of property is different. If the selling price is fair market value, it is not a gift. If it is less than fair market value, the difference between the selling price and fair market value is considered a gift. This is a complex subject and you should find someone to help you plan for your father's need for care.
Barbara's closing comment re: getting advice is KEY.
Keep in mind a irrevocable trust also has risks in that the person named as beneficiary may have issues (e.g., credit) that DEPENDING ON HOW THE TRUST IS DEFINED could affect the trustor's (Dad's) access to his assets.
A certified elder law attorney, although costly, can provide sound counsel, which may yield greater savings.
There are also other companies that are out there- for seniors They are costly but they are well worth it-In the state of NJ we paid $4,000.00- We waited to long though-my mom lost everything basically after 8 years of around the closck care- she is only 69 and had another fall so we are looking for placement of long-term care and basically have no money to pay-When she first had her stroke we should have gotten some help but didn't have time to look and I really thought she would get better after therapy-she basically gave up and is dependent on others for everything- PLEASE PLEASE ASK FOR HELP NOW- even through this website-- there is help and get it now- Actually I call myself this after 8 years of total stress finding aids-working and taking care of 2 young children of my own- I was high risk pregnancy when my mom had the stroke- also she refused care a day before when she had the 1st sign of the stroke which made me very angry needless to say-
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