What is a Medicaid Trust?

A Medicaid trust is a type of trust that you could use if you want to qualify for Medicaid to pay for long-term care. Though most seniors will qualify for Medicare, the program does not pay for living assistance. Since 70 percent of seniors will need assistance with their activities of daily living, Medicaid is the solution for many elder Americans.

Need-Based Program

You may be aware of the fact that Medicaid is a government health insurance program for people with financial need. If you wanted to qualify for Medicaid to pay for your long-term care, and you have assets, you could engage in a Medicaid spend down.

In spite of the name, you do not necessarily have to spend all of your assets before you apply for Medicaid. You probably want to leave behind resources for your loved ones after you are gone, so you could give them gifts before you apply for Medicaid. They would essentially be receiving their inheritances in advance.  The effect of the gifts on eligibility for Medicaid will depend on who is receiving the gifts and when.

Medicaid Trusts

While direct gift giving is a possibility, you could go in another direction and create a Medicaid trust. A Medicaid trust would be an irrevocable trust. Since you cannot revoke this type of trust, you would be surrendering incidents of ownership in legal parlance. Because of the separation, the assets in the Medicaid trust would not be counted when Medicaid was evaluating your eligibility status.

If you are concerned about income, you could create an income only Medicaid trust. With this type of trust, you could not take back the principal, so the assets are not counted for Medicaid planning purposes. However, you could continue to receive income from the trust before you apply for Medicaid.

Income earners who use Medicaid to pay for long-term care must contribute toward the cost of care that is being received. As a result, if you were to a trust that gives you income, all or most of the income would probably go toward the cost of the care you receive if you ever use Medicaid to pay for living assistance.

A Medicaid trust can have other tax and asset protection benefits as well.

Revocable Living Trusts

We should point out the fact that assets that are conveyed into a revocable living trust would be counted by the Medicaid program. These trusts are popular for a number of different reasons, but only provide limited nursing home asset protection.

Free Medicaid Planning Report

Given the fact that most seniors will need long-term care and Medicare does not pay for it, you should certainly go forward with a strong understanding of the Medicaid program if you want to be fully prepared for your twilight years.

To gain some in-depth information about this program, download our special report. The report is free, and you can visit this page to access your copy: Charlotte NC Medicaid Planning.