Making Smart Use Of Your Medicaid Trust

For many older people, or those who are facing that prospect, long term nursing care, or even moving to a long term care center, can create financial difficulties. Any type of long term care is extraordinarily expensive.

What About Medicaid?

Many seniors will have the benefit of relying on Medicaid, a government funded program that will help with the expense of long term care.

But Medicare has one drawback: It is need based. That means that seniors with too much income, or too many assets, can lose their ability to qualify for Medicaid. And for seniors who stand to inherit funds or assets, or who have funds or assets, those funds or assets can disqualify them from much needed Medicaid benefits.

Using a Trust

The good news is that there is a way to manage your estate plan, in a way that allows you to still qualify for Medicaid, through a Medicaid Trust. You can transfer things like cars, personal property of value, insurance policies, or even a home or second homes, into a Medicaid trust. But you do need to act fast: The trust has to be created between 2.5 and 5 years before you actually need in-home care, or care inside a facility, respectively.

An Irrevocable Trust

Seniors should not put assets in a Medicaid trust that they will need to access or use, because Medicaid trusts are irrevocable trusts. Even if you can undo the trust, doing that will then disqualify you from Medicaid, as if the trust never existed. So you should only put assets into a Medicaid trust that you don’t need—usually, assets that you intend on passing along to beneficiaries later on anyway.

Some Flexibility But Not a Lot

Although most trusts allow you flexibility in who is named as the trustee, a Medicaid trust does not. You cannot name yourself, or your spouse, as the trustee, but you can name anybody else, and you can change the beneficiaries from time to time as you see fit. So, you do maintain some control over your assets and who inherits them.

You and your spouse can still keep your home and live there, and you can even receive any income that may be derived from assets that you place in your Medicaid trust, such as rental money or stock dividends. You will pay income taxes on any money derived from the assets in the trust, however. The trustee is responsible for investing trust assets responsibly and in a way that they generate income.

You do not have to put anything that is Medicaid exempt anyway, into the trust. In other words, many retirement accounts are already protected and not considered an asset for Medicaid purposes, so many of them don’t have to be included, assuming they are qualifying retirement accounts.

We can help you plan for your future while also protecting your assets.  Call the Torrance will and estate attorneys at Samuel Ford Law today for help.

Sources:

smartasset.com/estate-planning/medicaid-trust

policygenius.com/trusts/medicaid-trust/