Does a trust protect assets from Medicaid?

On Behalf of | Jan 9, 2023 | Medicaid Planning And Asset Protection |

As long-term care costs continue to rise, many people are looking for ways to keep their assets from being used for expensive senior care. In this regard, trust funds can be a powerful tool and may help seniors protect their hard-earned savings. 

But does creating a trust also ensure protection against Medicaid? It depends on the type of trust and how it is structured. 

How does a trust protect assets from Medicaid spend-down rules?

A trust is a legal agreement that grants control of an asset to a party (trustee) responsible for managing it in the best interests of the beneficiary (the recipient of the asset). 

When planning for the future, it’s essential to understand the differences between revocable and irrevocable trusts. A revocable trust allows the trustor to maintain control of its contents and make changes whenever they want. They can help to protect your wealth during your lifetime but may be subject to estate taxes upon your death. With an irrevocable trust, you give up all control of its assets, meaning that any changes must be mutually agreed upon between the beneficiaries and trustees. 

In terms of New Jersey Medicaid spend-down rules, a trust can be utilized to transfer assets from the Medicaid applicant to another individual. As long as specific regulations are followed, including a five-year lookback period, you may successfully shelter your assets from Medicaid recoveries. Various types of assets can be placed into a trust, including investment accounts, real estate, cash, and other valuable property. 

When setting up a trust, it is important to make sure that you consult with someone who can provide guidance based on the specific details of your financial and familial situation. Depending on the nature of the assets being protected, there may be questions involved that require expertise. Trusts can be a helpful tool to protect your assets, but it’s imperative to understand all aspects of them before moving forward.