An irrevocable trust may be part of Medicaid planning for some

by | Mar 30, 2018 | Firm News |

As our nation’s population ages, more and more people will need care in their older years. Whether they choose in-home care, an assisted living facility or a traditional nursing home, paying for such care can easily exhaust a person’s financial resources and nest egg. Some people in New Jersey may assume that when the time comes, they’ll utilize Medicaid to pay for their long-term care needs. The issue with this is that a person must have little in the way of “countable assets,” in order to qualify for Medicaid. This means that before Medicaid will pay for their long-term care needs, they will need to have exhausted nearly all their other sources of assets on medical care, without leaving any inheritance to loved ones.

It is possible, however, to both qualify for Medicaid while still retaining at least some of one’s assets to supplement what Medicaid does not pay or to pass onto one’s loved ones. A person can do so through the creation of certain types of trusts. In general, trusts can be either revocable or irrevocable. Revocable trusts can be changed during a person’s lifetime. Therefore, they are useless in planning for Medicaid eligibility.

On the other hand, irrevocable trusts, once created and funded, cannot be changed during a person’s lifetime. However, it is important to keep in mind that the Medicaid program has what is known as a “look back” period, which covers the five years prior to applying for Medicaid. If funds are placed in an irrevocable trust or even gifted to someone else within these five years, it could lengthen the amount of time that needs to pass in order for a person to qualify for Medicaid. Properly executed irrevocable trusts, funded early enough, may be able to protect at least a portion of a person’s assets when it comes to both qualifying for Medicaid and still being able to leave their loved ones with an inheritance.

Keep in mind that the information in this post is of a very general nature. Any trust — irrevocable or revocable –can be a very complex legal document. Therefore, those who are interested in executing a trust as part of their Medicaid planning strategy will want to seek the advice of a legal professional, which this post does not provide.

Source: Investopedia, “Asset Protection Trusts: Help For Seniors,” Greg Daugherty, accessed March 26, 2018