Medicaid planning may include the use of trusts

It seems like you spend one phase of life preparing for the next stage in life. You went to college to prepare for your working years and your working years preparing for retirement. Now you are getting ready for a period of time few people look forward to: the time when you may need long-term nursing care.

You can expect to pay tens of thousands of dollars a year for care in an Oklahoma nursing home. Saving for that kind of expense is nearly impossible, but the sad fact is that most people over age 65 will need some kind of long-term care at some point. This may be in-home nursing, temporary care after a fall or surgery, or advanced care for Alzheimer’s or another illness. Since there is no way to accurately predict how your life will play out, careful planning is crucial.

Irrevocable Trusts

Medicaid has very strict guidelines for the amount of countable assets you can hold to be eligible. Qualifying for Medicaid when the need for long-term care arises will be an important part of obtaining appropriate medical and personal assistance. One way in which you can protect your assets and still qualify for Medicaid is by establishing an irrevocable trust. Some important elements of an irrevocable trust include the following:

  • Unlike a revocable trust, you cannot change the terms of an irrevocable trust.
  • You cannot remove assets funded to an irrevocable trust.
  • A trust can provide you with income or supplemental funds to pay bills and other expenses Medicaid doesn’t cover.
  • To avoid a penalty period, you must establish your trust at least five years before applying for Medicaid benefits.

While a revocable trust may give you more control over your assets, Medicaid counts the value of revocable trusts against your eligibility. This is because you may amend or revoke the trust at any time, altering the total of your countable assets. An irrevocable trust can protect your assets and allow you to qualify for government benefits.

Other Medicaid planning options

You may consider a third-party trust in which someone else funds the trust with express instructions that it will not pay for expenses government programs like Medicaid cover. Third-party trusts, unlike first-party revocable trusts, may also pay you part of their principal without risking your Medicaid eligibility.

A special needs trust, or (d)(4)(A) trust, is also an option for someone disabled who has not yet reached age 65. Funds in a (d)(4)(A) trust do not count against your eligibility for Medicaid. However, someone other than you must set up a special needs trust, such as your parent, guardian or the court. You may also seek legal counsel about the options that are most appropriate for your situation.

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Edmond, OK 73013

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