If you are considering applying for Medicaid for yourself or a loved one to pay for costly nursing home expenses, you may already be familiar with the financial requirements that a person must meet in order to qualify for Medicaid. Without getting into the details of all of the rules and exceptions, for a single person to qualify for Medicaid they must have no more than $2500, can keep a house, and a car.
In addition to the financial requirements to qualify for Medicaid, there is a 5 year look back period. What that means is that any gifts made in the 5 years prior to applying for Medicaid will be assessed a penalty by which the applicant will be ineligible for a certain number of months based on the value of the gift. One highly effective strategy to qualify for Medicaid while preserving assets is a Medicaid Asset Protection Trust.
The Medicaid Asset Protection Trust is an irrevocable trust. The person that creates the trust, called the trustor, is the person that is seeking to qualify for Medicaid. That person cannot be the trustee of the trust, but can reserve the power to remove the trustee and replace that person at any time. The trustor is entitled to the income from the trust, but not the principal.
By placing assets in the trust, the trustor triggers the 5 year lookback period, but after the 5 year period has expired, the trust assets will no longer be countable assets for Medicaid purposes. They will not be subject to any Medicaid estate recovery and the assets will be protected for the trustor’s beneficiaries and will pass on without the hassle of probate.
A few important points to consider when creating the Medicaid Asset Protection Trust are:
- Do not put all of your assets into the trust at the outset. Since the trustor does not have access to the principal, the trustor will need to retain some assets for themselves in order to remain financially independent until the need for long term care.
- Be careful about continually putting assets into the trust as this may trigger the lookback period over and over as you make continuing “gifts”.
In essence, if you would like to preserve assets for future generations while qualifying for Medicaid long term care benefits, you can gift your assets to a Medicaid Asset Protection Trust. A qualified estate planning and elder law attorney can assist you in this matter.
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