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A Medicaid trust is a legal and financial relationship created to help an individual qualify for Medicaid, a United States health-care program for qualifying low-income and disabled individuals and families. A trust gives another party the title and control of property owned by the person who is attempting to qualify for Medicaid. If created and planned carefully, it can render a person’s assets exempt from consideration when he seeks Medicaid.
Some people require long-term nursing home care as they grow older. This can be expensive. Medicare, a U.S. medical insurance program for retirement-aged and disabled individuals, only pays for nursing home care for a limited amount of time. It also places restrictions on what it will pay for during a person’s stay in a nursing home. This leaves many individuals to seek other ways to fund their long-term stays in nursing homes, including private long-term care insurance and personal income.
If an individual cannot afford nursing home care, he may apply for Medicaid, a U.S. federal- and state-administered insurance program for low-income people. If the individual in need of care has income, assets, and other resources, he is expected to use them to fund his nursing home care, so he may not qualify for Medicaid. Instead, he may be faced with selling his property in order to pay for care. Some people seek to protect their property and qualify for Medicaid by creating a Medicaid trust.
When a person creates a Medicaid trust, he names a trustee, a person or entity, to hold the titles to his assets. The trustee is meant to hold and control his assets and use them to benefit of the trust’s beneficiaries. With a trust agreement, a trustee cannot handle the property in any way he wishes. Instead, he must follow the rules set forth in the trust agreement.
There are different types of trusts a person may consider in the hopes of protecting his assets and securing Medicaid help. One type, a revocable trust, is of no use for protecting assets for this purpose. Since the person who creates a revocable trust, called the grantor, can change or revoke it, Medicaid counts the trust's assets and income from them when deciding whether or not a person qualifies for Medicaid.
Irrevocable trusts, on the other hand, may be useful for qualifying for Medicaid, as the grantor cannot revoke or change them. Some people set up irrevocable income-only Medicaid trusts. When the person who created this type of trust dies, his beneficiaries obtain the property that was held in the Medicaid trust. While the grantor is alive, however, the trustee holds the assets and any income from those assets is paid to the grantor. If the grantor needs nursing home care, Medicaid would require this income to be paid toward that, but the person’s property would remain protected.
I have assets that I want to protect if my husband (71) has to go into a nursing home. I will probably have more time than he does before I would need nursing home care. I'm 69, but in better health.
If anyone has done a Medicaid trust, I'd be very grateful if you would let me know how it worked out. What if you don't have five years?
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