Is a Trust a Medicaid Resource?

Long-term care (LTC) Medicaid provides benefits to individuals who a need nursing-home level of care and meet financial and other eligibility requirements. Individuals whose resources exceed the LTC Medicaid qualification limit can take timely steps to ensure that they will qualify should they need nursing-home level care in the future.

LTC Medicaid planning includes asset protection and preservation techniques of which a trust may be a part.  Irrevocable trusts, if structured correctly, are generally exempt from Medicaid. The landscape surrounding estate planning and Medicaid can be legally complex and challenging. An estate planning attorney can help you navigate both Medicaid planning and ensure your assets remain protected.

Types of Trusts

There are many different types of trusts, some of which are resources for LTC Medicaid eligibility purposes.

Revocable Trusts

Revocable trusts can be amended or revoked (terminated) by the grantor. Revocable trusts generally allow the grantor, as lifetime beneficiary, to receive all of the trust income and to have access to the trust principal (assets) during the grantor’s lifetime.  Similar provisions may exist for the grantor’s spouse.  After the grantor’s death, the beneficiaries the grantor named will benefit from the trust at the time and in the manner that the grantor specified.  Because the grantor can revoke the trust and the trust assets returned to the grantor, a revocable trust is a resource and Medicaid will consider the trust funds in determining the grantor’s (or, if married, the spouse of the grantor’s) eligibility for LTC Medicaid benefits. Therefore, although they provide many advantages for management of assets during periods of disability or for probate avoidance, a revocable trust does not provide advantages for LTC Medicaid planning.

Irrevocable Trusts

An irrevocable trust cannot be amended or revoked by the grantor once it has been established.  Under traditional irrevocable trusts established for tax planning purposes, when a grantor funded the grantor’s irrevocable trust, the grantor lost control of their funds and the independent trustee was in charge of making investment and distribution decisions.  To the extent that the grantor could ever receive income and/or principal distributions from the irrevocable trust, the income and/or principal that could be received is a resource for LTC Medicaid eligibility purposes.

Medicaid Asset Protection Trust (MAPT)

A Medicaid Asset Protection Trust (MAPT) is a specific type of irrevocable trust designed to not be a resource for LTC Medicaid-eligibility purposes.  With a MAPT, a grantor can serve as trustee, can make investment decisions, and can make distributions to trust beneficiaries.  The grantor can even retain the ability to change trust beneficiaries within limits.  The grantor cannot, however, be a beneficiary of the trust’s principal and, if married, cannot have a spouse as a beneficiary of trust principal either.  The grantor (and the grantor’s spouse) can be a beneficiary of trust income, but the income will be countable for LTC Medicaid eligibility rules and will likely become a part of the grantor’s co-pay if the grantor receives LTC Medicaid benefits.

Supplemental Needs Trusts

Individuals who meet the Social Security Administration’s definition of “disabled” can protect most of their public benefits eligibility by establishing and funding a Special Needs Trust before they turn 65 years old.  Other family members can also protect assets by transferring them to a qualifying individual with disabilities or by establishing a Supplemental Needs Trust for the other individual.  For the trust to not be a resource when determining LTC Medicaid eligibility, technical requirements, which may include reimbursement to the state for Medicaid benefits the beneficiary received, must be strictly followed.

Things to Consider Before Creating a Trust

An LTC Medicaid applicant’s health status, income, and resources are just some of the factors that determine whether an individual is eligible for services.  LTC Medicaid rules impose a period of ineligibility on an otherwise qualified applicant who disposed of assets for less than fair market value in the 60 months prior (the “lookback period”) to applying for benefits.  This means that even if the assets themselves are not countable resources, transferring them to a trust during a certain time period before applying for benefits may create a penalty period in which benefits cannot be received.

While properly drafted and funded trusts can help individuals qualify for LTC Medicaid benefits, their advantages and disadvantages have to be carefully considered. Individuals thinking about establishing an irrevocable trust should consult with an experienced estate planning attorney to review their options given their unique circumstances and goals.

Contact Promise Law Today for Help

Medicaid planning can be challenging and confusing. However, timely action can help secure the benefits you and your family need to pay for long-term care while protecting your assets. Get started today and contact the experienced estate planning attorneys at Promise Law to set up a consultation: (757) 690-2470.


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