How a Trust Can Be Used in Your Medicaid Planning

Careful Medicaid planning could allow you to preserve your hard-earned savings for the benefit of your children or other heirs while remaining in compliance with Medicaid’s complex laws and regulations for asset limits.

Gifting assets to qualify for Medicaid can be a helpful planning tool; however, there are a number of pitfalls to be aware of before you make outright gifts to family members.

For example, transferring your assets directly to a child or loved one will open the gifted assets up to creditors, lawsuits and divorces of your children or other gift recipients. The very assets you are seeking to protect could be unwittingly lost to different, but just as dangerous, creditors and legal concerns.

Also, keep in mind, if you put assets in a child’s individual name, he or she can go out and immediately spend those assets. Will they really maintain the assets so they are available to use for your benefit during your lifetime? There is a good chance the answer to that question is no!

That’s why it is much safer to gift assets into an irrevocable trust.

Be warned that gifting assets will subject you to an ineligibility period based on the amount of assets you transfer within a five-year period prior to applying for Medicaid (i.e., the look-back period).

What is a Trust?

A trust is a legal entity under which the “trustee” holds legal title to the property for the benefit of others (i.e., the beneficiaries). The trustee must follow the rules provided for in the trust document.

Whether the trust assets will be counted against the Medicaid resource limit depends on the terms of the trust and who created it.

An experienced Elder Law attorney understands how to navigate the labyrinth-like rules that are our Medicaid laws and regulations and can ably guide you with creating a trust that will safely protect and preserve your assets for you and your heirs.

Why is an irrevocable trust a better approach than a revocable trust?

A “revocable” trust is a trust that can be modified or terminated by the person who created it.

Medicaid considers the funds that make up a revocable trust to be assets that are “countable” in determining Medicaid eligibility. Thus, revocable trusts are of no use in Medicaid planning.

An “irrevocable” trust is one that cannot be changed by the Grantor after it has been created.

If you’re thinking about consulting with an experienced Elder Law attorney, don’t delay! The cost of delay can be financially ruinous.

With advance consultation and planning, you can take advantage of some of the Medicaid planning techniques available to preserve your hard earned assets for your heirs.

The peace of mind one can achieve from consulting with an experienced Elder Law attorney cannot be overstated.

As always, we are available to answer questions and assist you with your Medicaid Trust Planning. Please contact our office at (610) 933-8069.

Check out our other great articles throughout this site that more specifically address the different ways to protect and preserve your assets.   Click here for more articles!

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For assistance developing a comprehensive estate plan or nursing home asset protection plan in Pennsylvania, please contact Douglas L. Kaune, Esquire at (610) 933-8069 or email him at Doug’s entire practice is focused on elder law, Medicaid application, estate planning, trust planning, estate administration and protection of clients’ assets from nursing home spending and estate and inheritance taxation. Unruh, Turner, Burke & Frees, P.C. is a full-service law firm which has three convenient office locations in Phoenixville, West Chester and Paoli, Pennsylvania. The firm primarily services clients in Chester, Montgomery, Delaware, Philadelphia, Bucks and Berks Counties, but can represent clients throughout Pennsylvania.