Protecting Assets from Medicaid: How Funding a Trust Can Help

PROTECTING ASSETS FROM MEDICAID

We all want what is best for our families. Ideally, we would like to help loved ones on both ends of the continuum of life: the younger generation with expenses related to college, home buying, and starting their families; and the elder generation with expenses related to retirement, nursing home costs or assisted living situations and long-term medical care, if necessary. You have likely worked hard with exactly these goals in mind. But when it comes to balancing the needs of your family, you do not want one side’s needs to erase the hopes of the other. With careful planning, you can protect your investments for your own retirement and the next generation while still providing quality care for aging family members.

Long-Term Care

With nursing homes averaging $79,000 a year, and many people living in nursing homes or assisted living facilities for three years (or more) on average, the expense can be staggering. Creating a trust just might be the solution to help your family manage those expenses.

Medicaid

To be eligible for Medicaid, an applicant’s assets, including income, must be less than a certain amount. If they exceed the financial limits, they will not qualify for Medicaid assistance. In some states, however, that money can be “spent down” – lowering the income or assets right into the Medicaid eligibility range. Certain assets are countable including bank accounts, stocks and bonds, property, cash value of life insurance policies, 401Ksand vehicles. Other assets are “non-countable assets,” which include IRA’s if getting required minimum distributions, primary residences (such as your homestead), personal property, and pre-paid funeral expenses.

Irrevocable Trust

Shifting a loved one’s assets from “countable” to “non-countable” assets is best done through an irrevocable trust. Under an irrevocable trust, a trustee is named to manage the fund. The trustee takes charge of the day-to-day operations of the fund and is not required to make any specific payments. But the trust also helps enable you or your loved one become eligible for Medicaid.

Medicaid does have a look-back period that varies by state that may result in a delay of eligibility and can include penalties. That is why advanced estate planning is pertinent as you prepare for long-term care while protecting your legacy for generations to come. Call us at (281) 885-8826 to find out how we can help.

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