Illinois Estate Planning & Elder Law Blog

Asset protection planning is about protecting your assets from creditors – and it is not just for the super-wealthy.

Anyone can get sued. Lawsuits can stem from car accidents, credit card debt, bank foreclosures or unhappy customers. If someone wins a monetary judgment against you, your family could become bankrupt trying to pay it off. To keep your assets away from creditors, you need to move them somewhere creditors cannot reach them. Asset protection techniques include maximizing contributions to IRAs, moving funds to an irrevocable trust, retitling various assets or using limited liability companies or family limited partnerships.

It is important to note that asset protection planning only works if you act before you are sued. Under the law, you may not defraud current creditors. If you are already being sued or if you know you are going to be sued and you transfer assets so that creditors cannot reach them, the court will reverse the transfer. That is why it is a good idea to put a plan into place now.

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A federal judge has ruled that retirees cannot dis-enroll from Medicare Part A without also losing their Social Security benefits and refunding all of the money paid to them.

Anyone who has reached age 65 and who is entitled to Social Security benefits is also automatically entitled to Medicare Part A without charge. However, the three plaintiffs in a recent case brought by three federal employees, wanted to drop their Medicare coverage because they claimed it threatened their coverage under the Federal Employee Health Benefit program, which they said was superior. They argued that Medicare law allows them to drop out of the program without losing their Social Security benefits.

The judge acknowledged that the three retirees had a legitimate point that the law does not specifically say that avoiding Medicare Part A means losing Social Security benefits. But the judge found that requiring a mechanism for Plaintiffs and other similarly situated individuals to dis-enroll would be contrary to congressional intent, which was to provide mandatory benefits under Medicare part A for those receiving Social Security Retirement benefits.

The judge also pointed out that the plaintiffs would not gain much by renouncing their Medicare coverage.

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For a Revocable Living Trust to function property, it is not enough for the Grantor (the individual who made the trust) to simply sign the trust agreement. He must fund his assets into the trust.

Funding refers to taking assets that are titled in the individual Grantor’s name or in joint names with others and retitling them into the name of the Grantor’s Revocable Living Trust, or taking assets that require a beneficiary designation and renaming the Grantor’s Revocable Living Trust as the primary beneficiary of those assets.

The goal of funding a Revocable Living Trust is to insure that the Grantor’s property is governed by the terms of the trust agreement. This allows the Disability Trustee to manage accounts held in the name of the Grantor’s trust in the event the Grantor becomes mentally incapacitated and allows the Death Trustee to easily manage and then transfer accounts held in the name of the Grantor’s trust to the ultimate beneficiaries named in the trust agreement after the Grantor’s death.

The Trustee of a Revocable Living Trust has no power over the Grantor’s property that has not been retitled in the name of the Grantor’s trust. If the Grantor becomes mentally incapacitated, the Grantor’s loved ones will need to establish a court supervised guardianship to manage the Grantor’s assets that are not held in the name of the Grantor’s trust.

This means that the Grantor’s property that has not been retitled into the name of the Grantor’s Revocable Living Trust will have to be probated after the Grantor’s death. This defeats one of the main benefits of a Revocable Living Trust which is avoiding probate.

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In Illinois, assisted living facility residents covered by Medicaid are not at risk of being evicted if they leave the facility for a temporary hospitalization.

The Illinois Medicaid program pays for services not just in nursing homes but in assisted living facilities which are meant to provide a home-like alternative to nursing homes. The Nursing Home Reform Law authorizes Medicaid to pay a nursing home to hold a room for a Medicaid recipient who is temporarily absent due to hospitalization and entitles the resident to return to the first available room.

Medicaid does not make similar payments on behalf of residents of assisted living facilities and the facilities are not required to give admission priority to returning residents. Illinois is one of only a handful of states which makes retainer payments to assisted living facilities on behalf of residents who are temporarily absent. Because of this law, Illinois assisted living facility residents covered by Medicaid are not at risk of being evicted if they leave the facility for a temporary hospitalization.

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