Asset protection trusts for Medicaid and long-term care planning protect parents better, by making sure that a child’s problems don’t bump into Mom and Dad’s money. Elder law attorney Dennis Toman explains why putting assets into trust has advantages over outright gifts to your children.
Sometimes, when people come in to the Elderlaw Firm and are concerned about how to protect assets for Medicaid, they ask, “Can I just leave everything directly to my kids? Can I just give everything to them now?”
The concern about that is that I’ve seen so many horror stories happen when parents have given children property or bank accounts directly, thinking that they were protecting those assets for themselves for later on. Many times, we’ll talk about, “Well, if you leave your assets directly to a child or you give assets directly to a child, what happens if that child dies?”
You know, about half of all marriages end in divorce and if you’ve given assets directly to your child, would you want those funds to be tied up in your child’s divorce? Or, heaven forbid, what happens if your child dies? In that situation, your assets could pass to your son-in-law or daughter-in-law, or to grandchildren who perhaps may not take a good care of them as you intended your child to do. Also in these situations, what if the child would have their own debts, or they have drug or alcohol problems.
All of these issues are reasons that you should not transfer assets directly to a child, but instead accomplish your goals by setting up the proper type of trust to protect the assets for both yourself and your family.
Many times, I’ve talked with families and explained to them the goal in protecting assets is to make sure that your children’s problems don’t bump in to mom and dad’s money. That’s why we often would advise you to use a trust rather than making direct gifts to a child.