Estate plans with asset protection.  A primary objective of the estate plans we draft for our clients is to avoid the probate court system in favor of a smooth transfer of assets to their beneficiaries.  Inherent to such planning is considering strategies for protecting valuable assets (house, farm, etc.) from the risk of being depleted if a client is admitted to a nursing home in the future.  A lengthy stay could defeat his or her entire estate plan.   An effective mechanism we use is a type of trust that offers both probate court avoidance and asset protection.  It is an irrevocable trust, often referred to as a Medicaid Asset Protection Trust. 

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The risk of asset depletion late in life is real.  Presently the private pay rate at a nursing home in Wisconsin is on average $9350/month.  Advances in healthcare and custodial care can enable an institutionalized person to live for many months, or years, in a nursing home, a substantial financial burden for most people.   (Medicare does not pay for nursing home custodial care.  It pays for short term therapy and rehabilitation.)  When a nursing home resident’s stay extends beyond her ability to pay the full monthly bill (she runs out of money) Medicaid coverage which will likely start paying for her care. (Medicaid pays a nursing home a reduced rate up to about $7200 - $8400/month (2023) depending on the nursing home and one’s care needs.)

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The cost of her care is now shifted to a social welfare program.  The consequence to her family is that the Medicaid Estate Recovery office in Madison has a legal obligation to seek reimbursement from whatever assets a nursing home resident owns when he or she dies.  Often the only asset a resident has left is their house and perhaps a vehicle.  (Medicaid typically does not require that a person sell their house while they are in the nursing home.)  Instead of inheriting the house according to mom's Last Will and Testament, her children must sell her house to reimburse the State of Wisconsin for a claim that could be $200,000 or more. 

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This type of asset protection strategy is not suitable for a person who, due to existing infirmities, is likely to need nursing home admission within the next five years after executing this kind of estate plan. Unexpected medical episodes can happen to any of us at any time and that is why some thought must be given now to have a backup plan such as reserve assets outside the trust, or family help, that would sufficiently meet some unforeseen health adversity during the five-year period.  Otherwise it could be a financial crisis. 

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We would be happy to discuss your estate plan goals.  Call for an appointment.  

 

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Kevin M. Connelly 

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Wisconsin attorney, licensed since 1988.

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Primarily serving La Crosse, Monroe, Vernon, Crawford, and Richland Counties in Wisconsin.