Does Putting Assets in a Trust Remove Them From Consideration by Medicaid in Terms of Eligibility for Long-Term Care Coverage?

4 answers | Last updated: Dec 26, 2017
A fellow caregiver asked...

Does putting assets in a trust remove them from consideration by Medicaid in terms of eligibility for long-term care coverage?

Expert Answers

Some people try to qualify for Medicaid long-term care coverage by creating a trust and placing their assets in it. This tactic can only work, however, if the trust totally and permanently ends the person's access to and direct benefits from those assets.

Medicaid can cover almost the entire cost of long-term care costs, particularly nursing home care, for people with very low income and few assets. Creating a trust and placing assets in it can remove those assets from Medicaid consideration as "available resources" only if all of the following apply:

  • The trust is created more than 60 months before applying for Medicaid coverage.
  • The trust is irrevocable, meaning that once the assets are placed in it they cannot be removed, and the trust cannot be ended.
  • The Medicaid applicant is not a designated trust beneficiary, which means that no trust assets could, at any future time, be distributed to the Medicaid applicant under the trust's terms.

Also, any income generated by the trust that goes to the Medicaid applicant is considered in determining the Medicaid applicant's income for eligibility purposes.

You can review some of these Medicaid trust rules by going to the Treatment of Trusts page on the Centers for Medicare & Medicaid Services (CMS) website.

If you are considering a trust for Medicaid eligibility purposes, you need to consult with an attorney who is not only experienced in creating trust but also is familiar with Medicaid eligibility rules.

Community Answers

Cmacp answered...

I am not an attorney. However, I believe the above answer is aimed at the potential recipient of Medicaid placing his or her assets in a Trust. That would require 60 months before the recipient could get Medicaid.

However, if the assets to be protected are an inheritance or money from other family members who wish to help, a Special Needs Trust can be set up. In the past, elderly parents who were concerned about an adult disabled child, would write that child out of the parent's will. The elderly parent would leave the disabled child's portion to a sibling with the promise that the sibling would care for the disabled sister or brother. This was a bad solution at best. If the sisbling who got the disabled person's inheritance, died, or went bankrupt, or was sued, or divorced, etc, - all the funds could be totally lost.

A Special Needs Trust is now a legal solution to caring for the uncovered needs of the disabled adult child. The parent sets up the Trust, names a Trustee and specifies what the Trust will pay for. A Special Needs Trust does not disqualify the disabled son or daughter from Mediacid - just as long as the SNT only pays for things not paid for by Medicaid. Examples can even be a car, or car payments, a house, or mortgage payments, personal items, etc. The Special Needs Trust can also be set up to pay attorney's costs thereby making sure that the disabled heir continues to have access to legal advice and protections. It is a way of providing for one's child without the risks of leaving their inheritance to another family member.It also protects the money from unscrupulous people in the disabled person's life. The SNT can even be set up so that upon the death of the beneficiary, any remaining funds are then distributed to whoever the parent designates. Often this would be the remaining sisters or brothers. A disabled person who is totally dependent on Medicaid in a nursing home can be in a very unpleasant situation. It's a way of providing for the disabled relative without disqualifying him if he needs Medicaid.

A fellow caregiver answered...

Very helpful and interesting. Thanks

Tbi mom answered...

I was told that upon death, the SNT funds first go to pay back Medicaid , then to beneficiaries, so essentially, with any serious injury, the SNT could be exhausted. Is this correct?