What is a Medicaid Trust?

A Medicaid Trust is set up as part of an individual’s overall Medicaid planning. It exists so that one’s assets can be protected and saved instead of being used to fund expensive long-term care, health care, or end-of-life care.

This kind of trust allows the grantor to transfer their assets into an irrevocable trust (as opposed to a revocable trust) which is then distributed to the grantor’s chosen beneficiaries, based on the grantor’s instructions, in the event of their death.

When applying for Medicaid coverage, your finances will be reviewed by CMS, going back five years. That is why it is important to plan early for this kind of trust. It must be set up at least five years before you need to apply for Medicaid coverage that will pay for nursing home care, a long term care facility, or any other high-cost end-of-life care.

How does a Medicaid trust work?

It is important to understand that a Medicaid trust is not for millionaires who want to give all their money to their children instead of paying for their healthcare, but rather, it is about serving people who need to plan carefully in order to meet their care needs as they age.

This kind of planning requires an individual to place their assets in an irrevocable trust. The fact that it is irrevocable is essential, because the grantor cannot make changes or access the principal once it is created. The grantor can use the income from the trust for living expenses.

It is important to choose the right person to manage the trust, as they are essentially in charge of the assets that will fund the grantor’s end-of-life care.

When the grantor is ready to apply for Medicaid, the funds that are in the trust are not considered part of their wealth, as long as the fund was created five years before applying.

Can a living trust protect assets from Medicaid?

Living trusts are a useful way to keep your beneficiaries from going through probate, but they are not the ideal solution if you plan to use Medicaid to fund any long-term care you may need. If the living trust is revocable, then no, it cannot protect assets from Medicaid’s financial review. Most living trusts are revocable, and Medicaid will count that as part of your reviewable assets.

Can Medicaid go after a trust?

First, let’s define what people mean when they ask if Medicaid can “go after” a trust. This terminology is referring to Medicaid wanting to use the principal in a trust to determine eligibility. If you have too much money, you will not qualify for Medicaid unless you “spend down” and eliminate some of your assets.

If you have funds in a revocable trust, Medicaid can use that money to determine your eligibility. The same is true if you have money in an irrevocable trust that is less than five years old. However, if you have placed your assets in an irrevocable trust more than five years before you apply, Medicaid will not take that principal into consideration.

Can Medicaid take your home if it is in a trust?

You can include your home in your irrevocable Medicaid trust, thus preventing Medicaid from being able to use it to determine how much money you have in cash and assets. If you are going to place your home in an irrevocable trust, you must ensure that the person in charge of the trust has your best interests at heart. You are giving your home to the control of someone else, and while you can live off the income from the trust, you are not able to make any decisions. The trust’s administrator can do that, so choose someone who will make decisions to benefit you, not just him or herself.

Frequently asked questions about Medicaid

Q: Are Medicaid and Medicare the same?

A: No, Medicaid is based on income, whereas Medicare is based on age. Some individuals will only be able to qualify for one, but some may qualify for both.

Q: How do I apply for Medicaid?

A: Here in Ohio, you can apply for Medicaid online, over the phone (1-800-324-8680), or in person at your County Department of Job & Family Services. You can also apply with help from an attorney, such as the elder care attorneys at Port Legal.

Q: Will Medicare cover my long term care (LTC) expenses and needs, instead of Medicaid?

A: Unfortunately, Medicare very rarely covers LTC, and only for short periods of time. You can purchase LTC insurance, but this can definitely be a prohibitively expensive option.

Are irrevocable trusts exempt from Medicaid?

Irrevocable trusts are exempt from Medicaid only if they are set up five years or more before application. If you need long-term care before five years have passed, you will need to understand the related penalties for gifts.

What is the penalty for gifts for Medicaid lookback?

Obviously, predicting the future is impossible. Even someone who intentionally plans for their long-term care may end up facing the need for care before they anticipated needing that care.

The principal in your trust is considered a gift to the person who is managing that trust. In other words, it is a gift to the beneficiaries of your will before your passing. Therefore, if you need to apply for Medicaid before 60 months (5 years) have passed between the gift and the application, you will have penalties to pay on that gift.

What is the maximum income for a single person to get Medicaid?

According to this state-by-state guide to Medicaid eligibility, these are the guidelines in Ohio: Adults aged 19 through 64 must earn a monthly income of up to 133% of the FPL, or $1,337 per month, which increases to $2,727 per month for a family of four. Pregnant women are eligible for coverage if they earn up to 200% of the FPL, or $2,010 per month.”

How much does a Medicaid trust cost?

typical Medicaid trust costs between $5000 and $10,000, although there are a lot of factors that can contribute to this. Talk with an elder care attorney to get more information about how much it will cost you, specifically, to set up a Medicaid planning trust.

Should you get a Medicaid trust?

There are a lot of factors that go into whether or not you should pursue Medicaid planning via an irrevocable Medicaid trust. Do you have a reliable person to be in charge of the trust? Do you anticipate having 5 or more years before you need long term care? Can you live off of the Medicaid income eligibility guidelines and the income from the trust during the time before you enter long term care?

A good elder care attorney can help you sort through these questions about Medicaid trusts.

Port Legal’s mission is to provide the most comprehensive probate, trust, medicaid, asset protection and elder care legal help in central Ohio. Contact us today for a free consultation so that we can discuss whether or not a Medicaid trust is a good strategy for your own long term care planning.