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Using Irrevocable Trusts To Protect Family Assets

For many families, real estate is the most important asset to pass on to children. Whether it is for sentimental value, present economic value, or the future potential for mineral rights resources, families often desire to preserve real estate for future generations. When long-term care is a possibility for parents in the future, irrevocable trusts can hold the key to preserving property and ensuring future value.

While the “5-year look-back rule” should weigh heavy on every planner's mind, for families seeking lifetime transfers of real estate, irrevocable trusts often are the answer. Such a transfer into irrevocable trust qualifies as a gift, subject to the 5 year look-back period for Medicaid. However, a properly structured irrevocable trust can ensure the property transfer begins at an appropriate time, and further ensures that the parent may reside in the real estate for the rest of his or her life. With careful wording, the client can even receive valuable avoidance of future capital gains tax issues.

Thus, in the right circumstances, an irrevocable trust can (1) protect a family's assets from nursing home costs and Medicaid Estate Recovery, (2) protect a parent wishing to reside in the home for the rest of his or her life, and (3) avoid future capital gains taxation for children if they later sell the property after a parent's death. In addition, there are many, many variations of these trusts which allow them to be tailored to your individual needs.

If you have valuable real estate, consider consulting a knowledgeable elder law attorney to ensure the property is protected for future generations.

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