is Medicaid Planning legal, necessary?

Of all couples over age 65, at least 70% will need nursing home care for one of the spouses. Unfortunately, many couples wrongly believe that the transfer of their assets to their revocable Living Trust will protect them from Medicaid recovery. Even with a revocable trust, the cost of nursing home care, sometimes exceeding $50,000 per year, can quickly deplete the savings of the average senior. Revocable trusts are an important planning technique for minimizing the costs and time delays of probate administration and for providing continuity of management in case of disability, as well as, in many cases, minimizing estate taxation.

Congress makes the rules of estate taxation and advisors help their clients utilize these rules to their clients’ advantage. Everyone accepts the fact that estate tax planning is perfectly legal, as long as the techniques utilized are not abusive. The goal of such estate tax planning is to completely avoid estate tax when the first spouse dies, and after the death of the second spouse, when estate taxes may be due, to pass the maximum legal amount to the client’s children or other beneficiaries in order to “keep it in the family”, paying as little as possible to Uncle Sam.