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In Case You Missed It: A Discussion with Sarah Ambrogi about Estate Planning, Trusts, and Leaving a Legacy for Your Heirs – Part 3

Our very own Sarah S. Ambrogi, Esq. recently had the honor of being featured as a keynote speaker at this year’s Silver Linings Senior Healthy Living Expo at Manchester Community College. We sat down with Sarah to discuss some of the most important points from her presentation and how adults in New Hampshire can prepare for the future and leave a lasting legacy.

What is a trust and how does it work?

A trust is a form of planning that picks up where a will leaves off. It is a way of planning that same distribution of your assets but planning it such that it will not have to pass through the probate process. A will, on the other hand, must pass through the probate court to get the assets distributed out to the beneficiaries; that’s a process that can take anywhere from six months to a year or more. A trust is a way of putting things in place while you’re alive so that when you pass away, your assets simply flow out to your beneficiaries with no probate court process. This can shorten the process to a few weeks or a month instead of six weeks, six months, or a year.

A revocable trust is the starting point for trust planning because it is a very flexible document and can be changed at any time during your life. You can set it up however you like in terms of who you name to be in charge as trustee or how you have the beneficiary set up. You can also use it as a way of planning for children who should not receive all their assets at once. It has a lot of flexibility to it, and it accomplishes a lot. Now, I will point out that it is only one type of trust, but it is the basic type of trust that we work with.

Will a revocable trust protect my assets from creditors?

The answer is no, but there is an exception that I would like to mention: if you are thinking about creditors of your children, you can set up your revocable trust while you’re alive in a way that will protect the assets that are going to them. It involves keeping their inheritance in trust, but for you, who is creating the trust, it does not serve as an asset protection vehicle – not at all. There are, however, other kinds of trusts that we can use that do protect assets from creditors.

Can a nursing home or Medicaid take away my house?

One of the things that is important to know about the long-term care setting, particularly assisted living, is it can be confusing. When you’re looking around, you may get the impression that an assisted living facility is a place where you could rely upon public benefits, such as Medicaid, to pay. There are other forms of public benefits, but Medicaid is the one we mostly think about. When we look at assisted living facilities in New Hampshire, I would say 90% of them are based on a financial model where it’s a private pay-only arrangement. If you or a loved one needs long-term care and you like the look of that lovely assisted living facility down the road, just recognize that you’re most likely going to be using your own assets to pay for that care. Some people are going to make that choice – that between the income that they have coming in and the assets that they have saved, it is a worthwhile tradeoff. That’s what I did with my own mother: she went into a facility that was private pay and many people make that choice.

A very common myth is when people will think “I don’t want the nursing home to take my house,” but, that is a misunderstanding of how the financial model works. Applying for Medicaid involves providing the state, not the nursing home, with five years of financial records and the state requires the individual who is applying for Medicaid to be down to no more than $2,500. A very common mistake that people make when they go into a nursing home is applying for Medicaid with too much in assets because it results in them getting denied.

Now, a house is a very interesting subcategory asset, because when you have a married couple and one of them is going into a nursing home, we are able to protect certain assets for the spouse who is at home. We call him or her the “community spouse.” The community spouse is allowed to keep their home and the nursing home, the state – nobody can touch it. That’s another common misconception.

How can I ensure that I leave a lasting legacy?

I like to get to know people and where they are in their lives. You know: married or not married, children or no children; I like to find out what their goals are. If you have a piece of property that’s been in the family for generations and want to make sure that the piece of property is protected, then we ought to use that property as your legacy and talk about either a revocable or an irrevocable trust that can protect that property. If you say, “You know what, my spouse and I just retired and we’re living our best life. We want to go around the world and we don’t want to restrict our assets. We just want to have a good time and whatever is left is for our kids,” then I would suggest a revocable trust to avoid probate and the resulting complexity upon your death. Most people are somewhere in between: they’re not willing to give up complete control of their assets, but they don’t want to just spend, spend, spend – they want to make sure that things are organized and in a good place for their family. That’s going to benefit from a basic revocable trust, set up to benefit their family. They have freedom to use their assets as they like during their life, but they know that whatever they do leave behind is going to take care of whoever their chosen beneficiaries are.