Can you put assets in a trust so they aren't spent on healthcare expenses

I have zero faith in the humanity of the US health care system, and I keep reading stories of people who have insurance but the er, hospital or doctor who works on them ends up being out of network, and then people end up with five or six figure bills. Even if you do ‘everything right’ you can still lose everything in our health system. The aca didn’t fix it, I don’t believe and politicians are too dysfunctional to care.

If you can make a company an llc so the bankruptcy of the company doesn’t mean you lose your house and life savings is there something comparable for health care? Can a person make their retirement savings, home equity, personal savings, vehicles, etc incorporated so that they can’t be used to pay health care bills?

Trusts are usually designed to make the transfer of assets easier after the principle has died. The usual strategy for overwhelming medical bills is bankruptcy, which doesn’t make your continuing care any easier.

Medicaid, Medicare, and MediCal are available in some circumstances. MediCal (a California program) requires a patient to “pay down” their assets, aka spend savings and liquidate what can be sold, although it makes an exception for the patient’s residence and one car, if it’s being used to transport the patient.

The agencies say that they watch for transferring savings or property to other family members in order to qualify. Some families start the transfer early, in smaller yearly amounts, so that it won’t show as pay down avoidance. There can’t be any agreement on paper, though, so it requires a lot of trust.

Even if it’s possible, failing to pay the bill is likely to make future medical issue more problematical. Granted, losing everything on the first one means you won’t be able to pay the second one; however, failing to pay the first one means you might not get treatment the second time.

I think the short answer is No.

For someone ill and near the end of their life, one strategy is to transfer their assets to their heirs, so that they have no assets and (assuming they have no income) can apply to Medicaid. However, when you apply for Medicaid, any gifts or transfers of assets made within five years (60 months) of the date of application are subject to penalties.

In other words, if you transfer $250,000 to your son in 2010 and tomorrow apply for Medicaid and say “look, I’m penniless. I have $600.00 to my name and no income.”, Medicaid will say “ok, you can start getting Medicaid as soon as you pay the $250,000.00 you gave your son.”

Also if you “sell” your $250,000 hunting lodge to your son for $5,000, the amount below market value ($245,000) would be considered a gift and subject to penalty.

If you did all that over 5 years ago you’re ok as far as your Medicaid application is concerned.

Peoplle used to be able to sheild themselves from all kinds of things by filing corporation papers and shifting all their assets into the corporation. Only a couple hundred bucks filing fees. I don’t hear about that much anymore, so maybe that loophole has been essentially closed.

There is an option of buying gold pool or other asset shares in offshore holding companies. Or just putting it into cash and stashing it under your mattress. Burglars are less likely to steal it than predatory creditors or white collar criminals or exorbitant civil judgements or just plain banks…

One idea I had was to start up a corporation, fund it (e.g. via a stock sale to yourself) with however much money you think is reasonable to spend on healthcare, then have that corporation register at the doctor’s office or hospital as the patient of record, then have that corporation, through its duly appointed agent (you, or perhaps an attorney), direct the corporation’s new vendors (the healthcare team) to perform their services toward you yourself. If Robert_columbia, Inc.'s bills turn out too high, then direct it (through your attorney) to file bankruptcy and file for a new corporation, “Columbia Medical Protection Services, Inc.”. When that company goes under after your next medical emergency, create “r_c Worldwide Heath Systems, Inc., an AssetMaster Corporation”.

Ideas:

  1. Yes, this would work.
  2. It would work theoretically in a legal sense, but no doctor will sign a contract with such a corporation - they would let you bleed to death on the street first before signing “The robert_columbia, Inc. Healthcare Vendor Independent Contractor and Release of Liability Agreement”.
  3. No, it wouldn’t work because the corporation would be considered fraudulent and subject to “piercing of the corporate veil”.
  4. No, it wouldn’t work because the law provides that the ultimate patient or person who receives the ultimate benefit of the deal is still ultimately responsible for paying the bill, even if a contract provides that another person is to be deemed responsible.

Seems like a perfect case for #3– a sham corporation that acts as nothing more than a proxy for the owner’s whims.

Just to clarify (I think you know this, but this sentence was potentially confusing): Medi-Cal is what California calls its Medicaid program. It’s not a separate program.

California has cutesy “Cal” names for everything. TANF (welfare) is CalWORKS. SNAP (food stamps) is CalFresh. Medicaid is Medi-Cal.

A trust can be used to shield assets from health care expenses.

One catch, though: in order to make it stand up under Medicaid testing rules (and probably most civil courts) it must be an irrevocable trust that cannot benefit you at all. That means it’s the same as giving away all of your assets; the trust then defines who the beneficiaries are, and under what conditions the beneficiaries can take out the assets.

So it’s kind of the opposite of what the OP is proposing, but it achieves much the same purpose in the end. It’s not the trust that pays the medical expenses and then declares bankruptcy. The individual pays medical expenses and declares bankruptcy, using the trust to make their assets are protected from creditors, and go to the defined beneficiaries.

Really, any more detailed analysis should be done with an attorney who knows the rules for your state and can take into consideration your specific needs.

If somebody has that much money, why can’t they get really good insurance?

It’s sad this question even has to be asked.

When my mother was in terminal decline, my stepfather opened his own bank account and transferred half of what was in there joint account to it plus enough to cover the estimated cost of a funeral. There was already a burial plot next to my father. He did this quite openly. Then he paid for her care from what was left in the joint account and then received medicaide. There was never any question about this.

Medical insurance won’t cover your stay at a skilled nursing facility, unless it’s a short term rehab stay. A basic to low quality nursing home can easily cost $7,000 a month. Long Term Care insurance can cover these costs, but it’s not nearly as good a bet as people would like it to be. This is primarily because it’s either extremely expensive to keep in place for a long time or impossible to get a policy written once you’re sick.

It’s true that you don’t have to be all that rich to have enough of a retirement nest egg available to afford $84,000 a year in nursing care, but people work their whole lives so they can buy a sailboat and star in a viagra commercial, not lay in a dumpy bed and watch NCIS reruns. And of course, most people don’t earn enough to put that much money away, but would still like to do something else with what they do have saved if at all possible.

There are time limits related to the transfer of property or placing that into a trust, to avoid liabilities for health care. You can’t just find out that you have a serious illness and give your assets to a grandchild or someone, and then claim that you have no assets for Medicare reasons.

It varies but I think it is 3 to 5 years. Meaning that you have to make a decision before you get ill.

There is no asset test to qualify for Medicare. In fact, Medicare isn’t for poor people - it is only for the elderly and disabled. You may be thinking of Medicaid.

The lookback period for Medicaid is 5 years and it does not vary, unless you have a time machine. The rule changed from 3 years to 5 years in 2006.

Thank you for clarifying.

It* will also cover the facility if you’re under hospice care. So you either have to be getting better or probably dying within half a year.

  • YMMV - When I was dealing with it, I was dealing with Medicare and my aunt’s fill-in insurance through her retirement.

Two anecdotes in support. My aunt kept an LTC policy scrupiously paid for and when we tried to use it, it would pay $250/month in a facility and nothing at all for home care. When I looked at the LTC policy offered with my employment, it was $200/month but would not cover me unless I got my weight down under 180 pounds and kept it there for two years. I’m closer than I was, but still working on that. And given my aunt’s result, I may decide that I’m better off being friendly with my kids than in paying for a policy.

Last I heard, California was starting up an intervention program for citizens with severe body odor. It’s going to be called CalStinks.

I feel you’re being Criti-Cal.

There are actually trusts where the income/assets are not counted for Medicaid eligibility and the money can be spent on the beneficiary’s needs (they’re either called supplemental trusts or special needs trusts- I’m not sure) - but there’s a catch. A big one- anything left when you die doesn’t not go to your heirs. What happens depends on the type of trust. My father was in a pooled trust run by a non-profit that was designed to make him eligible for Medicaid home care. His income went into the trust and wasn’t counted for Medicaid eligibility, and the trust paid for the expenses that were approved ( his share of the utility bills and food, his clothes, etc.) It would have paid his share of the rent or mortgage if his name was on the lease/deed, but my mother owned the house and the trust wouldn’t pay rent to a spouse but whatever was left in the trust after his death stayed in the trust and was used to pay other participant’s expenses. ( it was possible to get approval for expenses that exceeded the income the participant put in that month). One of the other types is required to use anything left after death to reimburse Medicaid.
Oh, and the reason my mother owned the house was because when it became obvious that someday my father would need Medicaid he transferred his share of the house to my mother and his name came off the bank accounts. And this happened far enough in advance not to run afoul of the lookback period.

There's  a reason that you really only see this sort of planning with disabled or elderly people - and the reason is that you can't possibly know which way to go until the point where you can see it coming. My husband and I could try to shield our house- but whose name should it stay in? We're both healthy and there's no way to tell which of us might need Medicaid someday. Suppose we put everything in my name, and I'm the one who needs the nursing home? OK, we've got kids. We can give the house to one of them. But suppose that child gets married and then predeceases us? It's very likely the house will go to the in-law. As far as I know, those special trusts are only open to the disabled , so you can't open one while you're healthy " just in case" - and you wouldn't want to anyway because there's no reason to think the trust will pay for any of the things you might *want* to do or buy but don't actually need.

I guess I wasn’t clear about what I meant in my OP, I wasn’t talking about medicaid. Here is what I mean:

You have private insurance with a network and you go to the ER, or go in for surgery, or get some labs done. Even though you go to an ER or hospital in your network, a physician or specialist or lab technician ends up working on your case. Because they are out of network, they charge the full markup price for care and your insurance refuses to cover it. So something that would normally cost $5000 and be covered by insurance instead costs $60,000 and you are on the hook for it.

Because insurance companies are promoting narrower networks to save money, and providers are subcontracting and/or realizing they can make more money by going outside insurance this seems like it’ll become a bigger and bigger problem.

Some plans have an out of network annual limit, but I don’t think all plans do. You go to the ER, and some doc who isn’t on your network works on you and you get a bill for 20k. Or you go in for surgery, and an unethical physician who isn’t in your network operates on you when you are unconscious, and you get a bill for 100k.

Can you put your assets into a secure place so when that happens you don’t lose everything?