Trusts can be a powerful tool in estate planning, but only certain trusts can protect assets while ensuring eligibility for Medicaid nursing home coverage.

Before starting any Medicaid planning, it is important to meet with an experienced, local elder law attorney to develop a plan that meets local regulations and is tailored to the client’s specific situation. The specific regulations and implementation of Medicaid programs can vary significantly from state to state. For example, Missouri’s Medicaid program is known as MO HealthNet.

To qualify for Medicaid nursing home coverage, individuals must meet restrictive financial eligibility guidelines. An individual’s countable assets must be below a certain level. In addition to looking at current assets, Medicaid also adds back any assets that the individual gave away, or sold for below market value, over the past five years. 

Revocable trusts, also known as living trusts, do not protect assets from being counted toward Medicaid eligibility. Revocable trusts allow for the creator of the trust to freely amend the terms of the trust and to remove assets from trust control at any time. Since the creator of the trust has complete control of the trust, Medicaid counts revocable trust assets as countable assets when determining Medicaid eligibility. Revocable trusts can be useful for avoiding probate, but they generally do not help Medicaid eligibility.

An irrevocable trust, on the other hand, can protect assets and help individuals become eligible for Medicaid nursing home coverage. Irrevocable trusts for the purpose of Medicaid eligibility are often known as asset preservation trusts. What makes a trust irrevocable is that the creator of the trust no longer has control of the asset, or the trust, once the asset has been placed in the trust. Often times, a trusted relative serves as the trustee and manages the trust for the estate’s future beneficiaries. 

Again it is critically important that these trusts are drafted by a local elder law attorney to make sure that the trust language complies with state Medicaid laws and regulations for an asset preservation trust. A further reason to work with an experienced elder law attorney is that certain transfers to an irrevocable trust can trigger tax consequences.

Additionally, the trust can only protect assets that were placed in the trust more than five years before the individual applies for Medicaid nursing home coverage. If an individual has less than five years before an anticipated nursing home stay, there are other planning techniques available to protect assets that can be discussed with an experienced elder law attorney.

To create an estate plan that protects your assets from a potential nursing home stay, please call Martha C. Brown & Associates at (314) 962-0186.