The 411 on Medicaid & Trusts

According to the Genworth 2020 Cost of Care Survey, nursing home rates have increased by more than 3% for both private and semi-private rooms in the last year. The annual rate in the U.S. for a private nursing home room averages $105,850 and $93,075 for a semi-private room.

Depending on your financial situation, those figures may certainly be a reason for concern. The good news is Medicaid assists with long-term care, if you meet certain eligibility requirements. However, in order to qualify for this program, your income and assets must be under a certain amount – depending on your state’s Medicaid program.

While some individuals choose to transfer or give their assets away to meet Medicaid’s stringent requirements, we recommend looking at other options. There are multiple challenges that can arise when doing this, and we strongly suggest seeking legal counsel before making this decision.

With keen estate planning, you can still preserve some of your estate while meeting Medicaid qualifications. One way to do this is through a trust – but not just any trust. There are several different kinds, some that count toward the Medicaid limit and some that don’t. If you are in this scenario, it’s vital to know the difference.

The most important thing to know when considering trusts and Medicaid is that any trust you can modify or cancel – such as a revocable living trust – will not benefit you in this situation. For your assets not to count toward the Medicaid limit, the trust must be irrevocable – meaning it cannot be amended or terminated without permission of your beneficiary. Essentially, you legally remove ownership to the assets in the trust.

Special needs trusts are a little different, but also won’t interfere with the beneficiary’s eligibility for government benefits. These are set up to hold and protect the financial assets of a beneficiary who is disabled. Earlier this month, we did a blog post specifically about Special Needs Trusts.

One important word of caution, Medicaid has a look-back period. If you give away or sell your assets – or fund an irrevocable trust – during this time frame, you will likely incur a period of ineligibility. While this time frame varies by state, it is 60 months – or five years – from your application date in most states.

As you can see, Medicaid rules are complex, and you need to be very careful about creating an effective plan. We recommend speaking with an Elder Law attorney to talk through your specific situation and options. Contact us to set up a free consultation. This is our expertise, and we look forward to offering you the guidance you need to make the best decision for you and your family.

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