This is Strategy #13 from Lamson & Cutner’s publication, “25 Strategies to Prevent Financial Ruin from Long-Term Health Care Costs.”  Click here to see the other strategies.

Choose your trustee wisely. When an applicant for Medicaid decides to transfer assets into a trust, the trust must be irrevocable. That means you no longer have control of whatever money or assets you place in it. If you could control them, that would indicate they're still yours, and Medicaid would therefore insist that you use the funds to pay for your care.

You'll appoint a trustee to manage the trust and make decisions on investing and disbursing your funds. Choose someone who you are confident has your genuine best interests and welfare at heart. To use an analogy, a trustee is like the president of a corporation. He or she is the boss. If you're going to put your money in a trust, better pick somebody you can count on.

Control is a big issue for many people, especially if they're currently in good health and have their wits about them. However, if you become ill and need home or nursing facility care, at a certain point it's either put the money into a trust or lose it. You'll forfeit the money anyway without appropriate asset protection planning, because under Medicaid regulations all but a small amount of your resources will go to pay for your care. Then you'll rapidly deplete your financial base and end up with nothing.

Considering these factors, you'll be in a better position with a trust strategy and appointing a trustee you have confidence in. There are legal restrictions on all trustees, and there aren't many who would want to run the risk of stealing your money.

In some families, people are not comfortable turning over control of their money and property to a relative or friend, for a variety of reasons. Certainly, if the person you have in mind doesn't have a history of being responsible, it's not a good idea to make him or her your trustee. First and foremost, you must have confidence in the person you select as your trustee.

If you can’t rely on your relatives or friends, you may be able to hire a professional trustee. Retaining a professional trust company is also a good way to avoid conflict in a family, and break a deadlock when there's an argument or concern about who will be the trustee. In addition, trustees have strict legal and fiduciary duties, so you can depend on a professional to have a better understanding of what the law requires. Of course, you'll have to pay a professional trustee. A typical fee would be in the vicinity of 1% of the value of assets managed per year.

We represented a client who unfortunately had very strained relations with her three children. Yet one of the sons was very devoted to her, and had watched over her. The client had to enter a nursing facility for rehabilitation after sustaining a head injury. Although she eventually recovered to a point where it would have been feasible for her to return home, she elected to stay as a permanent resident. Her assets were moved to a protective trust and her son was made trustee, as he was the only one she felt comfortable with managing her significant resources.

We filed a Medicaid application to cover the cost of her nursing home care, and initiated additional planning strategies. The application was approved, providing full payment of the nursing home's services, while a significant portion of her financial reserves have been protected. Her son can now use these funds on behalf of his mother as needed, making her stay there more pleasant. After she passes on, whatever is left can be distributed to her heirs, which would not have been possible without this asset protection planning.

25 Strategies to Prevent Financial Ruin from Long-Term Health Care Costs

1. You can qualify for Medicaid
2. Be clear on the downside - Without good planning you could lose everything.
3. Make a Long-Term Care Plan While You're Still in Good Condition.
4. Understand the difference between Medicare and Medicaid.
5. It’s NOT too Late to Protect Your Assets
6. Only Hire an Elder Law Attorney for Medicaid and long-term care issues.
7. Don’t Fill Out Your Own Medicaid Application
8. Trusts Protect Your Home and Property.
9. Use Different Trusts for Different Purposes
10. Cooperative Apartments Require Special Handling.
11. Evaluate Your 401k or IRA Carefully for Medicaid Purposes
12. Analyze Whether to Take the Lump Sum Option
13. Choose Your Trustee Wisely
14. Private Annuities can Help Protect Your Assets
15. Use a Caregiver Agreement to Transfer Cash Assets.
16. Keep Your Medicare Insurance
17. Not Just Any Power of Attorney
18. Elder Law and Estate Planning
19. Spousal Refusal is a Valid and Useful Strategy.
20. Health Care Proxy, not a Living Will.
21. Streamline Your Financial Affairs and Record Keeping
22. Consider Staying In or Moving Back to New York
23. Competent Counsel Means a Better Shot at Quality Care
24. Long-Term Care Insurance Won’t Necessarily Solve the Problem
25. Quality of Life is Paramount