How Can I Use a Trust in Medicaid Planning?
When people hear that the threshold for Medicaid assistance eligibility is an income that does not exceed $2,205 monthly, many believe they will never be eligible for the government program. However, this may not be quite accurate.
By working with an elder law attorney, some retirees can position themselves to receive help from Medicaid. Usually, this involves creating a trust.
What is a Trust?
A trust allows individuals to legally move some of their assets to a trustee. The trustee is a third-party who is required to follow a plan, so the assets eventually go to specific beneficiaries. For instance, a family may set up a trust fund instrument for a child who will be inheriting a large sum of money. The trust fund could give out chunks of the inheritance over time, so the child does not spend it all at once.
In terms of Medicaid, the trust is used to remove assets from the table. Therefore, when Medicaid considers how much a person makes, it only takes into consideration non-exempt income. Anything that goes into the trust will ideally become exempt from Medicaid’s consideration.
Pros and Cons of Trusts
As with all legal decisions, creating a trust for receiving Medicaid has its positive and negative sides. The biggest positive aspect to a Medicaid trust is that accumulated wealth does not have to be spent on hospitalization and related care. Medicaid pays for those costs for people who qualify for the program. Another upside is that the money is protected as well as it can be. Many people appreciate being able to pass down funds to their children, other loved ones, and friends, rather than spend it on their end-of-life health needs.
One of the downsides of an irrevocable trust, which is one that stays the same forever, is that it cannot be modified. Therefore, the trust must be airtight because the funds will not be available to the person who set it up. Another con is that trust beneficiaries who say they will help by making the funds available in emergencies may not. For example, a son who becomes a trust beneficiary is not obliged to help his parents if they get into unexpected financial trouble. For this reason, beneficiaries must be well-considered.
Medicaid’s Look-Back Period
Medicaid knows that people put assets, such as stocks, real estate, and retirement accounts into trusts. Therefore, the program has what is typically called the look-back period. The look-back period studies the five years prior to the person asking for Medicaid eligibility. If a trust was set up during the look-back period, Medicaid will deny eligibility. Therefore, anyone who thinks they may need a trust should start the process well before they apply for Medicaid.
Brooklyn Elder Law Attorneys at Korsinsky & Klein, LLP Help Clients with Medicaid Trusts
If you are worried about meeting the eligibility requirements to receive Medicaid, contact the Brooklyn elder law attorneys at Korsinsky & Klein, LLP today. Call us at 212-495-8133 or contact us online for an initial consultation. Our team is well-versed in the most complex laws regarding trusts and can help you understand your options. Located in Brooklyn, New York, and Lakewood, New Jersey, we serve clients throughout Westchester, Manhattan, and Long Island, New York.