Planning in the Event a Child Requires Nursing Home Care Before a Parent

In Post 85, I discussed the advantage of having a trustee with sprinkled powers amongst several beneficiaries, including elderly parents and other relatives.

The theory of such trust is it would be immune from creditors of the wayward child and should not be an available resource for the parent beneficiary.

Assuming an independent trustee and a child requires nursing home care before the parent. The child is one of the remaindermen of the trust. If the child goes into a nursing home, there would be an argument that the trust is not an available resource. However, the child's remainder interest would render the child ineligible upon receipt and death of the other beneficiaries.

The solution to such problem in the event the child enters the nursing home (to avoid the possibility of receipt of the remainder interest), would be a distribution by the trustee to a healthy child.

Such distribution should consider the following:
1. The trusts should not have mandatory "kickout" provisions which refer to Medicaid eligibility - N.J.S.A. 30:4D-6f.
2. The distribution should not be deemed a transfer. That is, statutory provisions against "trigger trusts" only apply to inter-vivos trusts under the federal statute - 42 U.S.C. 1396p(d)(3)(B)(ii).
3. Therefore there would be no resource of the child other than any funds the child may have and the distribution would not trigger the transfer rules.


Disclaimer: This article does not constitute legal advice and each person may have unique facts for which legal consultation may be necessary.
© February 2011, Post 134