Medicaid Planning Lawyer Pottstown
Preparing for long-term care while protecting your assets requires careful planning and legal insight. At Brandywine Estate & Probate Lawyer, our experienced Medicaid planning lawyer helps individuals and families in Pottstown navigate complex Medicaid rules and create effective strategies. To start planning for your future, call 484-285-5707 to schedule a consultation.
How a Trust Can Impact Your Medicaid Eligibility
When planning for long-term care, especially as you age, Medicaid can be a crucial resource for covering medical expenses. However, Medicaid eligibility is strict, with specific income and asset requirements. For many individuals, navigating these rules can be overwhelming. One potential solution to help meet eligibility criteria while preserving assets is the use of a trust. But how does a trust help when applying for Medicaid, and what should you know before considering this option?
Understanding Medicaid Eligibility
Medicaid is a government program designed to assist individuals who need long-term care, including nursing home care, and have limited financial resources. In order to qualify, you must meet both income and asset limits. If your income or assets exceed these limits, you may not be eligible for Medicaid assistance.
One common challenge for individuals seeking Medicaid is the asset limit. Medicaid allows only a certain amount of assets, such as savings or property, to be owned by the applicant. While the limits vary by state, they are generally very low. In Pennsylvania, for example, the asset limit for an individual is around $2,000. This means that if you have more than this amount in assets, you may be ineligible for Medicaid.
For many people, their home is one of their largest assets. While Medicaid has some exemptions for primary residences, if you need to access Medicaid for nursing home care, the value of your home could still be counted as part of your assets. This can make it difficult to qualify for Medicaid, especially if your savings and property exceed the asset limits.
How Trusts Can Help with Medicaid Eligibility
One strategy that some individuals use to help qualify for Medicaid is placing assets in a trust. A trust is a legal arrangement where a person (the grantor) transfers ownership of their assets to a trustee, who then manages the assets on behalf of the beneficiaries. When structured properly, a trust can help reduce your countable assets and protect your eligibility for Medicaid.
However, there are different types of trusts, and not all of them will affect your Medicaid eligibility in the same way. Below are the types of trusts commonly used in Medicaid planning:
Irrevocable Trusts
An irrevocable trust is one where the grantor relinquishes control of the assets placed in the trust. Once the assets are transferred to the trust, the grantor cannot alter or revoke the trust without the consent of the trustee and/or beneficiaries. This makes irrevocable trusts a valuable tool for Medicaid planning.
When you transfer assets into an irrevocable trust, those assets are generally no longer considered your property for Medicaid purposes. As a result, they are excluded from the Medicaid asset calculation. This can help you qualify for Medicaid even if your assets exceed the standard limits. The assets placed in the trust will be managed by the trustee, who will distribute the assets according to the terms of the trust, ensuring that they are used for your benefit or for the benefit of your chosen beneficiaries.
It’s important to note that the transfer of assets into an irrevocable trust is subject to Medicaid’s “look-back” period, which is typically five years. This means that if you transfer assets into an irrevocable trust within five years of applying for Medicaid, those assets may still be counted against you, and you could face a penalty period where you are ineligible for benefits. The penalty period is determined based on the value of the assets transferred and the state’s average cost of care.
Revocable Trusts
A revocable trust is another type of trust where the grantor retains the right to modify or revoke the trust at any time. While revocable trusts can be useful for estate planning purposes, they do not offer the same benefits when it comes to Medicaid eligibility. Since the assets in a revocable trust are still considered the property of the grantor, they count toward your asset limit when applying for Medicaid.
For Medicaid purposes, assets held in a revocable trust are not protected. This means that if you are looking to qualify for Medicaid, transferring assets into a revocable trust will not help you reduce your countable assets. If your goal is to qualify for Medicaid, an irrevocable trust is a much better option.
Special Needs Trusts
A special needs trust (SNT) is a type of irrevocable trust specifically designed to benefit individuals with disabilities without affecting their eligibility for government assistance programs like Medicaid or Supplemental Security Income (SSI). A special needs trust allows the beneficiary to retain their Medicaid eligibility while still benefiting from the assets in the trust.
While special needs trusts are typically used for individuals with disabilities, they can be an effective way to plan for Medicaid eligibility in specific cases. If you are creating a trust for a family member with special needs, it’s crucial to structure the trust properly to avoid disqualifying them from Medicaid.
Medicaid Asset Protection Trusts
A Medicaid asset protection trust (MAPT) is a specific type of irrevocable trust that is designed to protect assets from being counted toward Medicaid eligibility. When you place assets into a MAPT, you relinquish control of the assets, which are then managed by the trustee. The assets in the MAPT are generally not counted toward Medicaid’s asset limits, as long as the transfer was made more than five years before applying for Medicaid.
MAPTs are often used for individuals who anticipate needing long-term care in the future but are not yet in need of Medicaid assistance. By transferring assets into the trust, they can protect those assets from being used to pay for long-term care, ensuring that they are preserved for family members or other beneficiaries.
Important Considerations
Before setting up a trust as part of your Medicaid planning, it’s important to understand the potential risks and challenges involved. A few key considerations include:
- The Look-Back Period
As mentioned earlier, Medicaid has a five-year look-back period, meaning that any assets transferred into a trust within five years of applying for Medicaid will be scrutinized. This could result in penalties that delay your eligibility for benefits. - Loss of Control
With an irrevocable trust, you give up control over the assets you transfer into the trust. This means you will not be able to access or use those assets directly. If you are comfortable with this arrangement and are certain that you want to protect those assets for the future, an irrevocable trust can be an effective strategy. - Trustee Selection
When creating a trust, you will need to appoint a trustee who will manage the assets on your behalf. It’s crucial to choose someone trustworthy and capable of managing the trust in accordance with your wishes. In some cases, you may want to appoint a professional trustee, such as a bank or financial institution, to ensure that the trust is managed properly. - Consultation with an Estate Planning Lawyer
Medicaid planning involves complex legal considerations. It’s highly recommended that you consult with an experienced estate planning lawyer before setting up a trust for Medicaid purposes. A lawyer can help you choose the right type of trust, navigate the look-back period, and ensure that your trust is legally sound and effective for Medicaid planning.
Plan for the Future with a Medicaid Planning Attorney
Medicaid planning is essential for ensuring you receive the care you need while protecting your assets. At Brandywine Estate & Probate Lawyer, our Medicaid planning attorney in Pottstown offers skilled legal advice and personalized strategies to navigate the complexities of long-term care planning. Call 484-285-5707 to schedule your consultation and begin preparing for the future today.