The "Widow's Transfer"

For many of the older generation, the issue of the long term care of their disabled child was seldom addressed in terms of dollars and cents. It was, and is, a matter of total commitment to do what is necessary on a daily basis. When those tasks exceeded the ability of the caregiver, many looked to private residential placements for accommodation. As part of this transition most communities performed some type of financial analysis to evaluate the sponsor’s ability to pay the expected costs. Many of these financial reviews, in hindsight, fell short in projecting both the inflation factors for care, the life span of the resident and the ability of sponsor to cover those dynamic costs over a lifetime, both theirs and the resident’s.
Today, many of parents are watching as their assets fall to levels that are worrisome and threaten both their lifestyle needs and that of their child’s. Their greatest fear then becomes “What if I have a catastrophic event and all of my money is used for my care? What will be left for my child?”
One possible solution may be a little known rule in Medicaid planning, which combined with special needs trust regulations, allows for instant asset protection. This law allows for a parent to transfer some or all of their assets to an existing special needs trust without incurring any personal transfer penalty. This would allow that parent to safeguard their remaining assets for their “resident” child while immediately qualifying themselves for Long Term Medicaid coverage. This is the Medicaid that pays for nursing home care.
To use this rule the trust had to be created by a parent or grandparent and be “a living trust”, able to accept current deposits.
One additional planning note; since individuals may lose their capacity to make rational decisions due to some form of dementia, it is imperative to have this subject well defined in a Durable Power of Attorney document to insure that it is fulfilled.
It is advised that an experienced Elder Care attorney be consulted on this and other life planning issues.