A trust is a legal entity that is created when one person, referred to as a “Trustor” or “Grantor”, and another person, referred to as a “Trustee”, enter into a contract called a Trust Agreement. The trust agreement states that the trustor will provide the trustee with certain property which the trustee agrees to hold for the benefit of persons or entities that are specified in the trust agreement as beneficiaries.
Often, a trustor will place their home in a trust. This is most often done in order to avoid including a home in a probate estate in order to avoid the time and expense of a probate court procedure to determine heirs and distribute property. Another reason for doing so is to try to move the property out of the trustor’s individual name in order to protect the property from any legal exposure the trustor may have in his or her own affairs. Unfortunately this action can cause more problems than it solves.
While a trust will effectively avoid probate, it will only remove exposure to any personal legal liabilities of the trustor if the trust agreement is one that fully removes his ownership control of the property. Trust agreements very often fail to do this because the trustor continues to maintain ownership control over the property.
One problem that elder law attorneys frequently encounter when trusts are used for a home is in obtaining Medicaid assistance for elders to receive skilled nursing. The problem occurs frequently because most elders cannot afford the extremely high cost of skilled-nursing care without Medicaid assistance. When a home is owned by a trust the home becomes an asset of the trustor that the Medicaid Agency (ALTCS in Arizona) counts in deciding whether the individual is “poor enough” to be eligible for the Medicaid assistance. In Arizona a single person is prohibited from having more than $2,000 in property in order to be eligible for such assistance. If the house is in a trust that does not completely remove all ownership control from the trustor these persons are deemed ineligible for such assistance. In such cases it is best to leave the house in the name of the person rather than moving it into such a trust.
There are effective ways for an elderly homeowner to maintain ownership control of a home, maintain eligibility for skilled-nursing Medicaid assistance, and avoid probate of the home on the owner’s death. An elder law attorney can help a homeowner attain all three of these goals, and at much lower cost than an approach which may leave the homeowner unable to obtain the needed Medicaid assistance. At Arizona Mobile Attorneys we can assist you with estate planning and health planning issues like these.
© Michael G. Kelly, Attorney at Law, Arizona Mobile Attorneys