Medical expenses can be very high, particularly towards the final stages of one's life. It's a bit depressing to consider that a large part of the money you've saved for your children will be used to keep your body healthy and well-informed during your final years. And depending on how much you have and how much you earn each month, you'll be unable to count on government aid to help preserve some of your hard-earned assets safe for your kids. There is a way to detach your personal assets from those of others to help you access crucial assistance programs such as Medicaid and ensure that the money you have saved over time will go to your family members and loved ones.

Many people have an extra little bit of money in a safe place with the money and overall fortune of a single percent. In the case of most American families, the cost of end-of-life treatment is a significant expense, and Medicaid can be crucial in ensuring that there's some financial legacy left over after the death of a loved one. Planning for the future will help you to sequester your small fortune and ensure that the most valuable and sought-after worth assets are not considered countable.

Life Estate

When used to grant property, it divides ownership between the person giving it away and the recipient. Many parents create an estate plan to decrease their assets to be eligible for Medicaid. Although the parent retains a certain amount of ownership of the asset, Medicaid does not count it as an asset, although this can differ from state to state. A life estate is valid throughout the life of the person who created it. It is prohibited to sell the property without the consent of the beneficiaries. For instance, the parent cannot sell their home without their children's consent when their children are beneficiaries of the estate of life.

Cons

However, life estate deeds do have negatives, too. One of them is that it can remove any control you may have over your previous property in addition to the right to reside in it. It's also not reversible. Once the transfer has been made, the transfer cannot be reversed without the other person's consent. If, as a result of a tragedy, the beneficiary dies before the time that the owner or grantor dies, and the kin of the beneficiary dies, they will be the new inheritors, which the owner has no say in.

In addition, if the original owner lives, it's up to the owner to pay taxes on the property until they die, and the property is transferred to the next owner. This means that they will carry the cost of taxes for the potentially expensive property without having the ability to sell it, get a loan, or any other way to control it apart from living in it.

Irrevocable Trust

If you're trying to gain an eligibility status for Medicaid and are concerned that your house will be a hindrance to you from receiving Medicaid, think about obtaining the irrevocable trust. For instance, if the couple owns the home, one can transfer their part over to their spouse. The couple's Medicaid eligibility does not cover the house.

There must be a gap of five years between the establishment of the trust and the request for Medicaid. Otherwise, the trust funds will be considered part of the assets already in place to determine Medicaid eligibility. So, you should not begin an irrevocable trust immediately before applying for Medicaid to be eligible for these benefits. One disadvantage of an irrevocable trust is the creator of the trust surrenders the rights they hold in relation to the house. However, the trust beneficiary cannot sell the house until they have been appointed as trustee. After an irrevocable trust has been established and the trustee has been appointed, they cannot regain control over the trust.

Key Differences

It's important to remember that the existence of a life estate and an irrevocable trust isn't always an option. You transfer the ownership of your home irrevocably into the trust, yet you remain in the right to control it. In this case, you can sell the house, make remodel the house, lease out a part of it, and so on. But the property itself, or its sale results, would remain with the trust.

In this case, the parent would not be tempted to give their children a portion of the tax burden associated with having a home. The owner would have greater control over the property and would not require their child's consent to sell it. This is the ideal alternative. It will still allow parents to be eligible for Medicaid and not be able to count the property count included in their financial assets; however, they would still be the sole decision makers for the house.