Many seniors have established or have at least considered establishing a trust as part of their estate planning.  As I discussed in a previous Question & Answer there are different kinds of trusts and they can be used to achieve different estate planning objectives.  The most common type of trust used in estate planning is a living trust (sometimes called a revocable grantor trust).  A living trust is one that is created during your lifetime.  It is distinguished from a testamentary trust, which is a trust that is created by including provisions in your will to create a trust.  A living trust can be either revocable or irrevocable.  Most living trusts are written as revocable trusts, which means that the grantor (the person who created the trust) can revoke it or modify it at any time.  In some instances a married couple will establish a joint living trust.  In the case of a joint living trust the consent of both parties will usually be required in order to modify or revoke the trust. 

Unfortunately, like so many estate planning questions there is no simple answer – there is no “one size fits all” approach. The short answer to your question is that it depends on the client’s circumstances. 

For many clients  a major objective in establishing a trust is to avoid probate.  Transferring your home to your trust will accomplish this objective.  If you own your home solely in your own name at the time of your death, your personal representative will have to file a probate court proceeding in order to transfer  legal title to the beneficiaries designated in your will or (if you die without a will) to your heirs at law or to sell the property. If you have transferred your home to your trust then at the time of your death your trustee can transfer the property or sell the property as directed in the trust agreement.  However keep in mind, as I discussed in a previous column, there are other methods of avoiding probate.  You can add another person as a joint owner with rights of survivorship, which means that the property will pass automatically to the joint owner upon your death, or you can execute a “Ladybird” deed (sometimes called a beneficiary deed) which allows you to retain complete control over the property during your lifetime but upon your death the property passes automatically to the person you have named in the deed as the holder of the remainder interest.

For married couples there are several other considerations.  Most couples own their home jointly as “tenants by the entirety”.  This means that upon the death of one spouse the home will pass automatically to the surviving spouse.  Neither spouse can sell or transfer their interest without the other’s consent.  In addition, if property is held as a tenancy by the entirety, it is protected from attachment for debts incurred by only one of the spouses.  The only creditors that can reach property held as a tenancy by the entirety are creditors that have a judgment against both husband and wife jointly. Thus if one spouse has large debts that are just in his/her name, and the creditor gets a judgment against that spouse, the creditor cannot levy on property held in the name of the husband and wife as tenants by the entirety.  If the husband and wife transfer their home to their trust, the law is not clear as to whether the home would retain this same level of protection from creditors.  If protection from creditors of one of the spouses is a major consideration, it would probably be advisable to keep the home in joint ownership as tenants by the entirety and not transfer it to the trust. 

Transferring the home to a trust it can affect the person’s eligibility for Medicaid.  Medicaid is the major source of payment for nursing home care.  Under the current Medicaid rules, if the home is in a trust the equity value of the home is treated as a “countable” asset.  If the home is not in the trust, the equity value of the home (up to a maximum of $552,000 for a single person; no maximum for a married couple) is exempt.  The maximum amount of countable assets that a single person can keep and still be eligible for Medicaid is $2,000.  The countable asset limit for a married couple is $2,000 (the allowance for the nursing home spouse) plus one half of the couple’s countable assets as of the “snapshot date” but not less than $23,844 or more than $119,220 (the “community spouse resource allowance” for 2016).  In most cases a  person who has transferred his/her home to a trust and then has to apply for Medicaid will have to transfer the home out of the trust so that it will be treated as an exempt asset instead of a countable asset. However, in some instances for a married couple it may actually be to their advantage to have the home in the trust on the “snapshot date” and then transfer it out of the trust just prior to filing the Medicaid application.  Unfortunately the Medicaid rules are extremely complex and subject to frequent change. When the trust is created and the client has to decide whether to transfer the home to the trust, the client will not know whether Medicaid benefits will be needed in the future, what his/her financial circumstances will be at that time, and what the Medicaid rules will be.  This makes the estate planning process even more difficult.