Can an Irrevocable Trust Be Used for Assisted Living?

Author: Sarah Williams

Reviewed By: Rachel Rose

Yes, an irrevocable trust can be used for assisted living to protect assets for seniors claiming public funding. However, the trust can’t be used to pay for assisted living. Once created, irrevocable trusts remove control of assets from the individual who set it up, except for limited circumstances.

Revocable vs. Irrevocable Trust

A trust acts as a legal mechanism for transferring assets to a trustee, who then follows specified terms to manage those assets and distribute them to beneficiaries. Revocable trusts, also known as living trusts, leave control of assets to the grantor until their death.

Individuals can change the terms and beneficiaries of revocable trusts and may choose to dissolve them. Conversely, guarantors of irrevocable trusts cannot control assets within or change them. Individuals can only change trust conditions in limited situations. Laws vary across states. If a senior’s circumstances drastically change, they should seek advice from an estate planning attorney.  

Irrevocable Trusts, Estate Taxes and Medicaid

Because irrevocable trusts remove resources from an individual’s control, the law no longer considers them part of the estate. Therefore, trusts allow beneficiaries to avoid estate or inheritance taxes on assets in states where such duties apply. Additionally, individuals don’t need to declare anything held in an irrevocable trust as income or assets for Medicaid purposes. This applies equally to regular Medicaid and Home and Community-Based Services waivers. Although Medicaid exempts certain resources, such as an individual’s main home, one vehicle and prepaid funeral plans, it considers most other assets when evaluating eligibility. Placing second homes, other vehicles, stocks, savings accounts and other resources in an irrevocable trust can help seniors qualify for financial assistance for assisted living. It also protects the possessions and finances of their spouses and children. However, seniors must still comply with Medicaid’s Look-Back Period, which varies among states. The rule stipulates that transfers should be recent. In many states, this Look-Back Period extends to five years.