This is our final post in our series of articles addressing the topic of asset protection trusts. This is a popular topic, and it’s easy to understand why. People spend their livings working and saving money. After a life of hard work, no one wants to see their money or property taken from them. Therefore, the idea that you can protect your assets with special legal instruments is something you need to know about.
Most importantly, you must know that you need to find a lawyer who can counsel you and guide you through this process. There are many different types of trusts. You need an attorney willing to listen to your story and help you choose the right type of trust for your situation.
Why put your home in a trust in Oklahoma?
There are many reasons for transferring your home into a trust. I’ll explain a few of them here.
One reason is to keep your house out of the court system if you were to die or become incapacitated. With a trust, you can pass on your home to your children (or whomever you want) without having to go to court. If you’re in the hospital and need someone to manage your mortgage, taxes, insurance, or business matters, a trust can help you do that easily.
Another benefit of passing your home through a trust is that it can save capital gains taxes for the people that inherit. Some folks choose to just add their children on to a deed. In legal terms, this is considered a gift. When you gift something away, the recipient also inherits your “basis.” This is an accounting term for what you paid for it. That means if they later sell the asset, they will pay the difference of what you paid and what they made. If they made a nice profit, they will pay a high tax!
When you transfer real estate through a trust, the recipient gets a “stepped-up basis.” This means they inherit the asset at its current market value, not the original price the grantor paid. This is typically desired by the persons inheriting the asset. Giving your property to your children is a generous gesture; but when you do it through a trust, it is even better!
All of the above are great reasons for putting your home in a trust. But what about protecting it from Medicaid? That can be another perk, but only if you use the right type of trust.
Does putting your home in Trust protect it from Medicaid in Oklahoma?
The answer depends on what type of trust you use. A trust can protect your home from Medicaid, as well as from hospital bills, medical liens, and other creditors. But not all trusts provide the same protections.
A revocable living trust will not protect your home from Medicaid. The reason is simple: because you can revoke it at any time, the trust does not truly own your house. However, even if you place you home in an irrevocable trust, that won’t necessarily protect it either.
Irrevocable trusts can be used for many purposes, from gifting assets to grandchildren, to holding Life Insurance free of estate tax. What makes these trusts different is how the attorney drafts the terms and the powers granted to the trustee.
To keep the government from counting your home as an asset, your must put your home into a certain type of irrevocable trust, specifically designed to comply with the law while avoiding Medicaid. If the attorney is not familiar with the current case law on the subject, he may draft an irrevocable trust that won’t pass the test.
Protect your home with a Medicaid Asset Protection Trust
If you are interested in shielding your assets from Medicaid, we can help you with this process. Travis Charles Smith is an attorney that helps families protect their assets from Medicaid. If you are interested in learning more, call our office to schedule a consultation or send us an email.