Is a Medicaid Trust Right for You?

What is Medicaid?
Medicaid is a joint federal and state program that helps low income individuals pay for the costs associated with long-term custodial care, such as a nursing home.

Does everyone qualify for Medicaid?
No. Because Medicaid is a so-called needs based program, it is only available to those whose assets and income levels meet the eligibility standards. This means you may have to spend down your assets before qualifying for Medicaid.

When should I start planning for qualifying for Medicaid?
Right now. Congress has established a period of ineligibility for Medicaid for those who transfer assets. Currently the look back period is 60 months (5 years). In other words, if you apply for Medicaid within 60 months of transferring assets by gift or otherwise, those assets will be included for purposes of determining your eligibility for benefits. Therefore, the sooner a person begins planning, the more likely it will be that he qualifies for Medicaid before he actually needs it.

Can I protect any of my assets for my family while still qualifying for Medicaid?
Yes. If you are not in immediate need of long-term care, there are a number of planning techniques available to protect your assets for your family. One of the most useful is a Medicaid Trust.

What is a Trust?
A trust is a legal entity involving three parties: the creator or settlor (the individual who creates the trust), the person who holds legal title to the property (the trustee) and the persons for whose benefit the trust was created (the beneficiaries). The trustee must follow the terms of the trust.

What is a Medicaid Trust?
A Medicaid Trust is specifically designed to exclude some of your assets, e.g., your home, for purposes of determining Medicaid eligibility, allowing it to pass to your heirs when you die. With a Medicaid Trust you still have the right to live in your home and even sell it. If you sell your home while it is in a trust, the proceeds will go into the trust and will be excluded when determining Medicaid eligibility, which means you will not have to spend that money before you qualify for Medicaid.

Are there other advantages to a Medicaid Trust?
Yes. If your Medicaid Trust contains property that increases in value (such as your home) your beneficiaries will receive the property with a step-up in basis at your death resulting in potential tax savings.

How do I know if a Medicaid Trust is right for me?
An experienced estate planning attorney will be able to evaluate your needs and recommend planning techniques that are right for you. Remember, for purposes of qualifying for Medicaid, it is never too early to start planning. On the other hand, if you delay, it may be too late.