Denver Colorado Estate Planning

Colorado Medicaid Planning And The Irrevocable Trust

Now that we have spent some time addressing the pros and cons of a revocable trusts ( or living trusts) as they pertain to Medicaid eligibility in Colorado, it is time to begin thinking about another kind of trust – the irrevocable trust.

An irrevocable trust differs from a living trust in that the creator of the trust is not allowed to make changes to it or revoke it after it has been established. Unlike the living trust, an irrevocable trust may be an ideal option for individuals and couples whose primary goal is to become eligible for Colorado Medicaid.

One of the first points to consider in the design of a trust is its relationship to gifting rules. If an asset held in a trust can still be “returned” to the creator of the trust, for any reason what so ever, then Colorado Medicaid will continue to treat it as an available asset that can be used to determine eligibility. While a living trust will not run afoul of any of Medicaid’s gifting rules, it will not necessarily improve your chances of becoming eligible for Colorado Medicaid.

 However, if there is no way for the assets held in a trust to be distributed back to you, then those assets are no longer “available.” They are, instead, considered to be gifts. “Gifts” made to an irrevocable trust will be penalized according to the same rules that apply to gifts made to other people.

For those of us who are already familiar with the five year look back rule, the irrevocable trust presents a unique opportunity. “Gifts,” of any size or any quantity, made to an irrevocable trust will essentially become invisible to Colorado Medicaid after five years.

It is like Confucius said – “The smart man will dig his well before he gets thirsty.”

 Call (303) 945-3242 today to get in touch with a Colorado Medicaid attorney who can help create an asset protection plan that is uniquely tailored to your needs. You can also visit our Medicaid website or attend a live seminar to learn more about estate planning tools and Medicaid crisis planning.

The Revocable Living Trust And Colorado Medicaid Planning

What is a revocable trust? It’s all in the name.

A revocable trust (sometimes called a “living trust”) is a trust that can be altered or revoked all together by its creator at any point during their lifetime.

From an estate planning perspective, the living trust offers a number of significant benefits that include an ability offer the creator of the trust a superior degree of control over the distribution of their assets after death and a means of avoiding the probate courts (unlike a will). However, for clients who are primarily interested in becoming eligible for Colorado Medicaid and protecting their assets from the high cost of nursing home care, the living trust may not be the most practical option.

 This is why: If a trust is revocable, Colorado Medicaid will be allowed to use all assets therein to determine the eligibility of an applicant. Because this type of trust can, essentially, be “undone” at  any point in time, Medicaid will treat the belongings inside of it as available assets. Moreover, some assets may even lose their protected status if they are titled in the name of a revocable trust!  

As you can see, there is no one-size-fits-all when it comes to the design of a trust. Always consult with a Colorado Medicaid attorney before you begin your planning to ensure that all of your needs will be properly attended to. Call (303) 945-3242 today to get in touch with a Medicaid attorney in your area.

You can also view our Medicaid website or attend a free seminar to learn more about estate planning tools, Medicaid crisis planning, and asset protection.

More Information On Trusts and Colorado Medicaid Planning

After explaining the idea of a trust to one of our Medicaid planning clients, the next question to follow is almost always, “What can I put in my trust?” or, more precisely, “What kinds of assets can my trust be used to protect?”

Generally speaking, a trust can contain any asset that can be titled in its name. “Trust property” can include any number of assets that range from property and other real estate to cash accounts and stocks.

However, when people come to understand the range of assets that can be titled in the name of their trust, they often fear that, by changing titles around, they will begin to lose control of their belongings. This is absolutely not the case! You are allowed to wear multiple hats when it comes down to the design of your trust. You can be the “grantor” (or the creator of the trust), the trustee, and the beneficiary in many cases.

It is important to remember that there are many different types of trusts designed to accomplish many different goals. You must consider them all carefully when you start your Medicaid planning as they each have unique rules and regulations. The two, most frequent, types of trusts are the revocable trust (or living trust) and the irrevocable trust. While we discuss each of these unique trusts briefly in future updates, it is always advisable to meet with a Colorado Medicaid attorney who can offer you guidance based on your unique situation. To do so call (303)945-3242 today.

You can also visit our Colorado Medicaid website or attend a live seminar to learn more about estate planning, asset protection, and Medicaid crisis planning.

Colorado Medicaid and Trusts

Now that we have addressed some commonly implemented tactics used to try and qualify for Colorado Medicaid that are ultimately ineffective – let’s talk about some planning strategies that do work.

One of the best Medicaid planning options available to individuals who are not in immediate need of Medicaid assistance is the legal document known as a trust. For those of you who are not wholly familiar with this kind of planning strategy, a trust is a special legal arrangement in which the owner, or creator, of the document (known as the trustee) manages and looks after the property and assets included in the trust for the benefit of another person (known as a beneficiary). When the trustee creates a trust they are able to dictate the specific instructions for how, when, and under what circumstances the assets included therein are to be handled now and in the future.

Though the name on the deed for a piece of property (for example) may change from that of the owner to the name of the trust, the trust ultimately remains under the complete control of the trustee. There is no loss of agency involved when creating a trust.

Now that we have covered some of the basic concepts involved with the creation of a trust relative to Colorado Medicaid planning, we will begin to explore this idea in more depth and start examining the benefits of this strategy in our future posts. If you would like to continue learning about trusts and other estate planning and asset protection tools you can visit our Medicaid Website or registier to attend a free seminar in the Denver area. You can also call (303)945-3242 to get practical answers from an experienced Colorado Medicaid attorney.

Colorado Medicaid And Partial Gifts

Every so often one of our clients will come to us with this idea:

They say, “I have a vacation property that is impacting my Medicaid eligibility. I know that I can’t just give it away because that would count as a gift and I would get a penalty. But I really want to make sure that that property goes to my child and they just can’t afford to pay fair market value on it. What would happen if, instead of giving it away, I charged my child $1.00 for it?”

While this may seem like a clever idea at first (many people think it is), it will not work. This strategy is known as partial gifting, and when you make a partial gift (sometimes called a “partial sale”) the total amount of money that you receive as compensation for this transaction will be recorded, and then subtracted from the fair market value of the asset. The number that comes out of this calculation is the amount of money that Medicaid will treat as a gift.

This means that, if you own a $150,000 vacation home and you “sell” it to your child for $5,000, then Colorado Medicaid will treat this transaction as if you had made a $145,000 gift and a penalty period will be incurred accordingly.

The Colorado Medicaid attorneys at The Hughes Law Firm can show you much safer ways of protecting your assets from Medicaid and the high cost of nursing home care. Call (303) 945-3242 today or visit our Medicaid website to learn more about Medicaid crisis planning and asset protection.

Colorado Medicaid And Joint Account Interests

Many first time Medicaid applicants are surprised to learn that, generally speaking, joint interests are considered to be available assets that can be counted against them. This is true unless the Medicaid applicant is able to prove that there have been significant contributions made by the other joint owners over time. This can be very difficult to do if you, or your other joint owners, have not been keeping diligent records.

Consequently, this means that simply adding a child or a friend’s name to your personal bank account will not change the accounts status as an “available asset,” nor will it reduce the amount that can be counted against you. In the vast majority of cases, the full value of the account will be used to determine eligibility.

Moreover, the all-to-frequent practice of adding a child or friend’s name to a personal bank account can have a high potential for built-in risk. If you decide to add another person’s name to your account – creating an “or” account in which either party can remove funds without the direct permission of the other – and the friend or family member takes out money to use for their own purposes, then that money becomes a gift. As the friend or child does not need the permission of the applicant to use these funds, it is not uncommon for applicants to find that they must undergo a penalty period for a gift they didn’t even know they had made.

However, if the applicant, instead of creating an “or” account, lists a friend or family member’s name on an “and” account – meaning that neither the applicant nor the second person can withdraw money without the permission of the other – then Colorado Medicaid can treat the entirety of the account as a gift. This can be a costly mistake! 

The rules for gifting under Colorado Medicaid are exceptionally complicated. You don’t have to try and navigate them on your own. Call (303) 945-3242 today to speak with a Colorado Medicaid attorney who can help you get your planning in order. You can also click here to learn more about Colorado Medicaid, Medicaid crisis planning, and asset protection.

Colorado Medicaid And Gifts Made By Married Couples

The rules concerning gifting under Colorado Medicaid are a little more complex for married couples than they are for single individuals. When a couple is involved, the penalty that is incurred from a gift is applied to both spouses – regardless of which spouse made the gift or whose money was involved. Because gifts such as these can impact the Medicaid eligibility of both spouses, it can feel as though the same gift is being counted against the couple twice. However, this is not so.

Suppose that one spouse applies for Colorado Medicaid during the initial five year look back period because they find themselves in sudden need of nursing home care. As far as the first spouse is concerned, the full penalty period will be applied for that gift. However, if the second spouse applies for Medicaid a little bit down the road, but is still within the look back period, then any time remaining on the initial penalty will be divided equally between the two spouses. However, if one spouse passes away during a shared penalty period, then the remaining balance on the penalty will be assigned to the surviving spouse.

So, it is not that the penalty for gifting is counted against a married couple twice, but rather that it is shared equally between them.

If you have further questions on gifting in Colorado Medicaid, call (303) 945-3242 today to speak with a local Medicaid attorney. You can also click here to learn more about Colorado Medicaid, Medicaid crisis planning, and asset protection.

Penalty Periods Vs. The Five Year Look Back Rule

Another common misconception about penalty periods in Colorado Medicaid planning is that there is an established time-frame that any given penalty cannot exceed. This is not the case. There is no upper limit on the length of a penalty period. It is the value of the gifted asset alone that will determine the length of a penalty.

If, for example, you gifted your $400,000 home to your son and daughter-in-law today and your state divisor figure (or the average cost of nursing home care per month) was $5,000, the subsequent penalty period would be, roughly, 80 months – or a little more than 6½ years.

At this point many people will stop and think “I thought that there was a five-year limit on penalties.” This is not so. When our clients reach back to that “5 year” number, it often turns out that they were really thinking about the five year look back rule, not the actual length of a penalty period.

It is extremely important to understand the difference between these two concepts. The look back period refers to the five year period of time in which Medicaid can look at and assess any and all figts made by an applicant prior to the date of their application. This means that, if you make a gift, of any size, and then wait five years before applying for Colorado Medicaid, the gift will, essentially, be ignored by Medicaid and you will not incur any penalties.

As you can see, proper planning is paramount. Call (303) 945-3242 today to get in touch with a Colorado Medicaid attorney or click here to visit our Medicaid website where you can learn more about Medicaid crisis planning and asset protection.

Colorado Medicaid Planning And Penalty Periods

Most of the individuals who are applying for Colorado Medicaid are familiar with the concept of penalty periods. To clarify – a penalty period will be incurred every time you make a gift to anyone other than your spouse. During a penalty period you will be denied Medicaid coverage regardless of whether or not all of your countable assets and your income fall within the criteria for eligibility.

The length of any given penalty period will be determined by the value of the gift that was given. The more valuable the gift, the longer the penalty. To get a rough estimate of the length of a penalty period, some experts suggest that you divide the value of the gifted asset by the average monthly cost for nursing home care in your area. Again, this is only a rough estimate.

There is a common misconception that an asset that is gifted to multiple people will, somehow, distribute the value equally over many recipients and thus reduce the actual value that can be plugged in to the above calculation. This is not the case. It does not matter how many recipients there are, the value will remain the same and the penalty period will remain the same.

Calculating the penalties for gifts and working around them are easily among the most difficult tasks in Medicaid planning. It is always advisable to consult with an experienced Colorado Medicaid attorney who can give you practical advice based on your unique situation. Call (303) 945-3242 today or visit our Colorado Medicaid website to learn more about Medicaid crisis planning and asset protection.

When The Community Spouse Makes A Gift Of An Excluded Asset

Now that we have addressed some of the measures in place to protect the community spouse while their husband or wife is receiving assistance from Colorado Medicaid in order to help cover the cost of nursing home care, it is time to consider some of the most frequent hazards that befall Medicaid recipients and their families.

While there are rules in place to protect the community spouse if they decide to sell their home, those rules change when the community spouse decides to make a gift of their home, or other excluded assets. If the community spouse decides that they want to give the family home over to their children – rather than selling it to them – Medicaid will, in many states, treat this as a disqualifying transfer of assets. Moreover, the penalty for a gift such as this will not only impact the community spouse, but the nursing home spouse as well.

While we have already noted that the penalty period for gifting, under conventional circumstances, begins on the day that the Colorado Medicaid application is first made, the nursing home spouse in this scenario would be disqualified as of the first day of the month in which the gift was made. And, of course, since it was the community spouse who actually made this gift, they would also incur a severe penalty period in which they would not be eligible to receive assistance from Colorado Medicaid either.

It is so easy to make a simple – but good natured – mistake such as this one. The risk is high and the consequences are costly. Call (303) 945-3242 today to get advice from a Colorado Medicaid attorney or visit our Medicaid website to learn more about Medicaid eligibility, Medicaid crisis planning, and asset protection.