What's the Deal With a Keystone Trust?

Terry asks Dave what he knows about keystone trusts. Dave explains what they are used for and the shadiness that can be attached to them.

QUESTION: Terry in Ohio asks Dave what he knows about keystone trusts. Dave explains what they are used for and the shadiness that can be attached to them.

ANSWER: Usually, they’re associated with people trying to hide assets so they can put their parents in welfare or Medicaid nursing homes.

Your daughter doesn’t have to pay for your nursing home. The only spend down would be of your assets. Basically, if you start moving stuff around to hide assets, even in a keystone trust, the government has a five-year look back. They can look back up to five years and undo anything you’ve done—even a keystone trust—because it’s called welfare fraud.

Medicaid and Medicare nursing homes are welfare for poor people. That’s what it’s designed for. It’s not designed for people who have money. If you’ve got money, you’re supposed to pay for your nursing home first.

You don’t need a keystone trust. You need to do one or both of two things: One is plan to pay for your nursing home because that’s the proper thing to do—you’ve got the money—and two is to make sure you’ve got the money. Get long-term care insurance in place when you’re 60 years old.

No, I would not do a keystone trust to take advantage of welfare.

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