January 11, 2023
Protecting assets from liabilities and risks is a common concern for most of my clients.
Lately, I have been having a number of conversations with people regarding how to protect assets. The risks causing concern often include lawsuits, divorce, bankruptcy and casualty losses. For each of these risks, there are options to protect assets for yourself and your family. These options might include protective trusts, business entities, prenuptial agreements and casualty insurance coverage. Planning for these will be case-specific to address the client’s particular situation.
Another risk that I address with clients that is often not initially thought of is how long-term care costs will affect their assets. Planning for this risk may include discussions regarding income producing assets, long-term care insurance and gift planning. Recently, there have been law changes in Minnesota that provide new opportunities for gifting and protecting assets using irrevocable trusts.
Change in long-term care statute
Previously, certain irrevocable trusts did not protect assets from long-term care costs in Minnesota because Minn. Stat. § 501C.1206 — and its predecessor statute Minn. Stat. § 501B.895 — allowed irrevocable trusts created after July 1, 2005, to be treated as revocable trusts for the purpose of medical assistance. Since these trusts were considered revocable for the purpose of medical assistance, the assets held in the trust would be considered available to the person who created the trust and their spouse when applying for medical assistance. If the value of the assets available to the applicant and the applicant’s spouse exceeded their resource amounts, the applicant was not eligible to receive medical assistance benefits.
In July 2021, a court decided in the Dorothy Geyen case that the terms of the Minnesota statute allowing the irrevocable trust to be considered revocable for the purpose of medical assistance conflicted with federal law, and the statute has since been repealed.
Most medical assistance rules remain in force
With the opportunities provided by irrevocable trusts in asset protection plans, it should be remembered that the other medical assistance rules relating to the transfer of assets remain in force. This includes the 60-month look back on gift transfers.
If a person gifts assets, including transfers to an irrevocable trust and then applies for medical assistance within 60 months of making this transfer, the person and their spouse will be ineligible to receive medical assistance benefits for a period time. This period of time is calculated by dividing the value of the assets gifted by the statewide average payment for skilled nursing facility (SAPSNF), which is currently $9,312.
Balzarini is an attorney at law for Miller Legal Strategic Planning Centers, a division of Hellmuth & Johnson. Contact him at [email protected].
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