Medicaid planning involves reviewing income and assets to determine strategies to protect certain assets while still meeting the criteria for Medicaid qualification. When done correctly, this allows an individual to retain certain assets and even leave a legacy behind while still benefiting from Medicaid payments going towards long-term care needs.
In the process to qualify for Medicaid, it may be helpful to create a trust to protect assets. The first thing to know is that only an irrevocable trusts work in this situation. An irrevocable trust cannot be altered or amended and that is the only one that will offer any benefit towards Medicaid planning. If you can receive any assets back that were used to fund the trust then the entire value of the trust becomes a countable asset for Medicaid eligibility purposes. The trust must be irrevocable and no distributions of the principal can be made to you as a beneficiary. You can use an irrevocable income-only trust to pay income earned from the principal without the principal amount being counted as an asset for Medicaid purposes.
The next issue to consider is that the assets transferred into the irrevocable trust are subject to the five-year look-back. This means that you must fund the trust at least five years before you apply for Medicaid.
The 2020 federal income limit for an eligible Medicaid applicant is $2,349 per month. The trust can be used to manipulate this income level. A senior’s income and assets must stay below those limits to qualify for Medicaid coverage for their stay in a skilled nursing facility. If their countable assets exceed $2,000 they will not qualify until the excesses are spent down or converted to an asset that is not countable.
Incorporating the use of trusts in Medicaid planning is extremely complicated. If the individual is disabled then a different type of trust will be used to accomplish these goals. There are first-party trusts (created by the individual for his or her own benefit) and third-party trusts (created by others for that individual’s benefit). It is essential that you hire an attorney with extensive experience in Medicaid planning and trust drafting to make sure that you end up with the document that you need for your specific situation. Contact the experienced estate planning attorneys at Stouffer Legal in the Greater Baltimore area to set up a consultation and start the process of using a trust to accomplish your Medicaid planning goals.
