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College and Long Term Care – ??? (Part 3) #LongTermCare

            The last two weeks I have been telling you about an increasing trend that we are seeing in cases that come through our office- grandparents who are paying for college, daycare, camp expenses etc. for their grandchildren.  While a big help to the children of our clients who can’t afford the rising educational costs it can be financial ruin for the clients themselves should they need long term care.  If they don’t have sufficient funds to pay for care and no long term care insurance either, the payments could disqualify them for Medicaid because of the lookback and penalty period.

            As I mentioned last week, there is a way to accomplish both goals of helping family members and preserving Medicaid eligibility.  It does require some forethought and planning ahead.  By setting aside funds in a trust, the senior can assist children and grandchildren financially.  When that need arises the funds come from the trust and not directly from the senior so do not fall within Medicaid’s lookback and won’t trigger a Medicaid penalty.

            There are a couple of important points to be aware of.  First, is that the trust must be established and funded by the senior at least 5 years before Medicaid is needed.  The best time to do it is when the senior is still healthy.  Transfers to the trust trigger Medicaid’s lookback and penalty.  Transfers out of the trust do not.

            Secondly, not all trusts will work.  Clients often ask whether their existing trusts will accomplish the task.  I always explain that trusts come in many shapes and sizes.  They are created for many different reasons and as such the agreement establishing the trust must be drafted carefully to achieve the desired goal.

Chances are that if you were not aware of the problem I have outlined in the last 3 posts and you have a trust it won’t protect your assets in the way I have outlined.  However, the only way to know for sure is for me to read the trust agreement.

            If your trust isn’t the right type or you don’t have one at all and are considering making payments for college, camp, childcare etc. for a family member, consulting with an elder law attorney to be sure you have enough money to cover what could be a $150,000 per year long term care expense (or more) before you go down this road could save you and your family from financial ruin.