Attorney Thomas B. Burton answers the following question:
"Does Revocable Trust Protect Assets from Creditors of My Mother?"
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Today's question comes from Appleton, Wisconsin and the reader ask the following:
“My mother has Investments registered in her name with me as a transfer and death beneficiary. Because she is advanced in age and recently confined to a nursing home and two older sisters are causing trouble. Mom and sisters are advising me or warning me to get those assets away from her revocable trust. To my understanding, my assets aren’t actually in their trust, since I am the sole beneficiary. With some type of irrevocable trust be in order or simply a separate revocable trust, which could be protected somehow from her creditors. Her current trust mentions that the proceeds are not accessible to beneficiaries or creditors. She does have a long-term care insurance and that should start paying soon for five years. She's a fairly healthy, 94 years young.”
So, great question and you've got a lot of facts going on here. I'll try to tackle through them as much as I can in a short video.
If you're the payable-on-death beneficiary of certain investment accounts, then those accounts would pass by contract to you upon your mother's death. So that's the part we're going to transfer on death account. However, if alternatively, those assets are titled to your mother's trust then they would be distributed according to the terms of the trust. So whatever the trust says is where they will go.
It is important to find exact information for these account and determine how they are titled, to know if they're going to pass according to the trust or according to the beneficiary designation.
Now, you mentioned long-term care insurance, if your mother is in the nursing home and she anticipates needing medic-aid assistance to help pay for her nursing home care, then you should not transfer any assets without seeking the advice of a qualified estate planning attorney. There's a five year look-back period for any asset transferred for less than value when a person needs to obtain medic-aid. So if your mom were to change some of the stuff now or gift assets to you, it could disqualify her from receiving medic-aid for certain period of time.
Now, you mentioned she has long term care insurance. That sounds like it runs for five years because she has that, you may be able to do some planning with the assets while you have the long-term care insurance to pay for her care.
And as to your last question, a revocable trust will no longer protect your mother's assets in the state of Wisconsin. Generally, now you need to use irrevocable trust and at date changed August 1, 2014, some trust before that date. The state of Wisconsin said, they would not go after assets in a revocable trust but they said, after that date, they will, for estate recovery and a revocable trust doesn't work if you're trying to qualify for medic-aid. So, if you are looking at asset protection options, I would discuss an irrevocable trust with the attorney you talk with. Again, I would look at using that long-term care insurance for five years to allow you and your mother to do some asset protection planning if that's what she chooses to do.
So great question and thank you for asking.
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