How can we use funds from a revocable family trust for care, if needed?
The short answer is that Medicaid has no direct claim on the money once your mother gives it away -- they can't make you or other family members return any of it. On the other hand, when your mother applies for nursing home coverage, for eligibility purposes Medicaid will consider as still belonging to her all amounts she's given away -- whether or not they go through a trust -- within the previous five years (within previous three years for gifts or transfers made before February 8, 2006). If still having those amounts would have made her assets too high for Medicaid, Medicaid will penalize her by delaying her eligibility for nursing home coverage. Exactly how long the penalty will be is calculated by taking the amount she's given away within those five years and dividing it by the average monthly nursing facility cost in the state where she lives. The period if ineligibility would begin from the date of her application for Medicaid nursing home coverage.
You should also be aware that if your mother has access, as one of the trust beneficiaries, to money in the trust, Medicaid might consider those funds as "available" to your mother and count them as part of her assets. This might make your mother ineligible for Medicaid coverage for as long as those funds put her over the Medicaid asset limit.
For more detailed explanation of these rules, and for some possible ways to protect some assets, look online at Elder Law Answers.
