Navigating Tennessee Asset Protection Trusts
For many of us in the middle class- navigating Tennessee asset protection trusts can be hard to understand. For those who aren’t multimillionaires but also don’t qualify for financial assistance—it’s crucial to think about ways to protect assets if we or a family member may need long-term nursing home care. According to the Genworth Cost of Care Survey for 2023, nursing homes in the Nashville area cost an average of $121,368 per year for a private room and $106,764 for a semi-private room. With an average care duration of 2.5 years for men and 3.6 years for women, the total cost can be significant.
While long-term care insurance can help, only about 10% of people over 65 have such policies. For many, setting up a Tennessee Asset Protection Trust can be an effective way to plan for these future costs. Medicaid coverage, known in Tennessee as TennCare, has strict asset eligibility rules, but a Medicaid Asset Protection Trust may allow you to protect assets while still qualifying for these benefits.
Understanding an Irrevocable Trust
An asset protection trust is an irrevocable trust, meaning it cannot easily be changed or revoked once established. Unlike a revocable trust, where you remain in control as the grantor, trustee, and beneficiary, an irrevocable trust limits your control. You are the grantor, but not the trustee or beneficiary, and legally you don’t own the assets within it. In Tennessee, however, an irrevocable trust can be terminated if all parties involved—the grantor, trustee, and beneficiary—agree.
Accessing the Money in the Trust
Although you’re not entitled to the funds directly, it is possible for the trustee to access trust funds on your behalf. The trustee can, for example, hold funds for a minimum of 30 days before using them to cover expenses, indirectly benefiting you.
Choosing the Right Trustee
Your trustee manages the assets in your trust, so it’s essential to select someone you truly trust. While you don’t have direct control, you still have some influence; for instance, you can change the trustee or adjust the distribution plan if necessary.
TennCare’s Five-Year Lookback
Putting assets in a Tennessee Asset Protection Trust counts as a gift for TennCare purposes and triggers a five-year lookback period. TennCare examines any substantial transfers within the five years before applying for Medicaid to prevent people from giving away assets to qualify for benefits. When you transfer funds within this period, you may face penalties, such as months of private payment for care based on the gift amount.
Five years have passed since the transfer, and TennCare disregards those assets. If it’s been less, you have options: pay privately for the remaining months until the five years are up, or, if necessary, dissolve the trust and create a new plan with your elder law attorney. We include provisions in our clients’ powers of attorney to allow an agent to terminate the trust if circumstances change due to health issues.
Additional Benefits of an Irrevocable Trust
An irrevocable trust shields assets from creditors other than TennCare, providing added protection for your estate. If you’re in a nursing home, trust funds can cover items or services TennCare doesn’t provide, such as a private room, enhanced comfort, or special therapies.
Making Your Irrevocable Trust a Comprehensive Estate Plan
We draft pour-over wills for clients with Tennessee Asset Protection Trusts, ensuring any remaining assets transfer seamlessly to the trust upon death, bypassing probate, and reducing administrative burdens for your heirs.
Connect with Elder Law of Nashville Today
If you’re considering a Tennessee Asset Protection Trust as part of your estate plan, Elder Law of Nashville is here to help. Our experienced attorneys specialize in these trusts and can guide you through the process to determine if this approach aligns with your goals and needs. Schedule a consultation today to protect your legacy and plan for the future with confidence.
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