Protecting Your Assets With A Medicaid Trust
Are you concerned about protecting your assets from being taken to pay for your nursing home costs? Many people who are concerned about paying for long-term care purchase long-term care insurance policies. Unfortunately, these policies are often extremely expensive – so expensive that many people cannot afford the monthly premiums. A less expensive option would be creating a Medicaid trust that is an irrevocable trust.
A Medicaid asset protection trust will help protect an applicant for Medicaid’s assets from counting in terms of his or her eligibility. In order to qualify for Medicaid, an applicant cannot own more than a certain amount of assets. Medicaid applicants can create a Medicaid trust, which will own their excess income so that the excess income does not exclude them from being eligible for Medicaid benefits.
What Is A Medicaid Trust Account?
Many Medicaid applicants assume that they can give away their assets right before applying to Medicaid in order to meet the allowable income limit set forth by Medicaid. This is not true, however. Transferring assets can result in transfer penalties that will prevent an applicant from qualifying for Medicaid for a certain length of time.
A New Jersey Medicaid trust is an irrevocable trust that holds a future nursing home patient’s assets. These Medicaid trust funds for the elderly go a long way to helping New Jersey residents prepare for the future.
When the assets are placed in a Medicaid trust, the government cannot use the assets to pay for Medicaid costs or to disqualify an applicant from receiving Medicaid. In order for a Medicaid trust to be legally valid, it must be properly drafted.
That is why we recommend hiring a skilled New Jersey Medicaid trust lawyer to draft the trust agreement on your behalf. At Giro & Associates LLC, we understand how important it is that our clients take advantage of trust funds for the elderly in order to avoid spending all of their assets on retirement costs.
Can Medicaid Go After A Trust?
Medicaid cannot go after a trust as long as the transfer into the trust happened outside the five-year lookback period. A trust for Medicaid only works well as long as Medicaid cannot touch the assets transferred into the trust. When the trust for Medicaid is well-drafted and outside the five-year period, Medicaid cannot go after the assets owned by a trust for Medicaid.
How Does A Medicaid Trust Work?
Medicaid does recognize a five-year lookback period. This means that if you transfer assets into a trust for Medicaid within five years of applying for Medicaid, you will not qualify. Medicaid will look back for the last five years and count any assets that you have transferred into a Medicaid irrevocable trust as countable assets that you own. It is essential that you do not transfer any assets into your trust for Medicaid during the five-year lookback period.
How Much Does It Cost to Set Up a Medicaid Trust?
Hiring an attorney to set up a trust for Medicaid planning is advisable. Most law firms charge per hour to set up a Medicaid trust. The cost associated with drafting your trust for Medicaid planning depends on how complex your estate is along with other factors.
One thing is clear, however, and that is that the cost of setting a Medicaid trust will be low compared to the cost of paying out of pocket for nursing home expenses. Nursing home expenses can easily cost $8,000 to $10,000 per month.
How To Set Up A Medicaid Trust
Setting up a trust for Medicaid asset protection requires choosing a trustee or trustees and beneficiaries. The person who creates the Medicaid asset protection trust is called the settlor, grantor, or trust maker. The trust maker needs to appoint a trust or trustees to manage the trust as well as control the assets owned by the trust. When creating a Medicaid trust, you cannot appoint yourself, your spouse, or your adult children or relatives as trustees.
Trustees must adhere to the provisions of the trust agreement, which state clearly how the assets in the trust can be used. As the trust grantor, you will need to appoint a beneficiary or beneficiaries who will benefit from the Medicaid trust after you pass away. The principal beneficiary must be someone beside you for the assets owned by the trust to be exempt from Medicaid eligibility.
What Is An Irrevocable Medicaid Trust?
The word “irrevocable” means that the testator cannot cancel, stop, or revoke the Medicaid trust. The reason why a Medicaid trust works to protect your assets is that it is irrevocable. When you place your assets into an irrevocable Medicaid trust, you cannot touch the assets. You cannot amend the trust agreement positions in any way.
Thus, the minute that you transfer your assets into an irrevocable trust, you lose control over the assets. Most importantly, the assets become non-countable for the purposes of Medicaid. Planning in advance is still necessary, however, because when you transfer the assets, they are still subject to the Medicaid lookback period.
However, after five years, the transferred assets will not cause you to have delayed eligibility for Medicaid’s long-term nursing home benefits. Planning well in advance will help you protect your assets for the future generation while making sure you qualify for long-term care through Medicaid.
Learn More About Medicaid Trusts In A Consult
A trust can only offer the benefits described above if it is uniquely tailored to your needs and circumstances, so it is important to discuss your situation with an experienced trust creation attorney.
If you would like to hear more about trust arrangements or schedule an estate planning consultation, please contact Giro & Associates LLC in River Edge, New Jersey, at 201-771-9436 or via our online form.