How To Protect Living Trust Assets From Medical Creditors

When you create living trusts, you may believe you are protecting your money from future debt, especially the cost of medical care toward the end of your life. These costs, which can stem from nursing home or hospice treatments, may total thousands of dollars and leave you and your family responsible for payment. Medical creditors may be able to access your living trusts for these payments; however, there are several strategies you can use to protect it.

Name Assets as Gifts 

If you want to protect your beneficiaries from your medical debt, you may be able to list certain assets as gifts. Once these are named as such in a living trust or a will, they may be much less accessible to creditors. There are several different types of gifts you can name in your trust, including:

  • Antiques 
  • Retirement money 
  • Income-generating property 
  • Valuable jewelry 

While naming gifts in your trust can help protect their overall value from medical debt, you may want to let your benefactors know there may be tax costs attached to each.

Draft an Irrevocable Trust 

While trusts can protect your assets in some circumstances, a living trust may allow Medicare and other medical creditors access to the funds contained within to pay for hospice or elderly care. Creating an irrevocable trust, or one that cannot be changed by you or any other party once it is validated, can prevent this access. For example, if you are living in a nursing home and have created this type of trust, the funds cannot be considered eligible as a source of payment for your care. This may help protect your beneficiaries from losing their inheritance in the future.

Become a Life Tenant 

If you sell your home and move into an assisted living facility, Medicare and other medical creditors may be able to take some or all of the proceeds to cover those costs. You may be able to prevent this by becoming a life tenant, which gives you the right to live in a home, even though you may move elsewhere, until your death. You can pass ownership of the home to another in a trust or will, which may shield the value of the home from medical debt. You may want to keep in mind, however, that transfer of property may include tax costs.

Medical debt toward the end of your life can drain your finances and cause your beneficiaries to lose projected inheritances, but there are ways to protect your assets. Speak to a Folsom living trust lawyer today for further information.



Thanks to Yee Law Group for their insight into estate planning and living trust assets.