Trusts in Medicaid Planning

Many older adults rely on Medicaid to help cover medical expenses, long-term care needs, and nursing home assistance as they age. However, eligibility for Medicaid is need-based. Applicants must show that their income and assets fall below certain levels to qualify. People whose assets are valued above Medicaid’s eligibility limits find themselves in an awkward position — too wealthy to qualify for Medicaid, but not wealthy enough to pay for long-term care costs out of pocket. One solution to this problem is a Medicaid trust.

Understanding Medicaid Planning

Arizona’s Medicaid program is the Arizona Health Care Cost Containment System (AHCCCS). The Arizona Long-Term Care System (ALTCS) is a department within AHCCCS that helps older people and individuals with disabilities access medical care and long-term care assistance. ALTCS assigns a caseworker to an individual, who then works with that person to craft a health care plan.

Unfortunately, long-term medical care can be expensive. It can be challenging for older adults to cover their necessary medical and living expenses without draining their bank accounts or going into debt, leaving nothing behind for their families. Medicaid can help cover dental care, meal delivery, doctor’s appointments, nursing home services, and in-home care. However, you must meet certain income and asset requirements to receive these benefits. An estate planning lawyer can utilize various tools, such as Medicaid trusts, to ensure you fall within the allowable limits.

The Basics of Trusts

A trust is an estate planning tool in which you (called the “grantor”) turn over control of your assets to a trustee, who then manages the trust on behalf of a beneficiary. When you place assets into a trust, they are no longer legally under your control. The named trustee becomes responsible for managing the assets in the trust and transferring them to your beneficiaries when you die.

There are two main types of trusts: revocable and irrevocable. A revocable trust can be altered or dispelled by the grantor during their lifetime. You cannot amend an irrevocable trust without significant legal intervention. Each type of trust offers distinct advantages and disadvantages depending on your financial situation. Trusts can protect some assets from creditors and provide unique tax protections.

How Trusts Help in Medicaid Planning

Placing your assets in an irrevocable trust can help you meet Medicaid eligibility guidelines while protecting your assets for your children or family. That’s because the assets held in trusts typically do not count as a resource for Medicaid purposes.

Setting Up a Trust for Medicaid Planning

There can be benefits and drawbacks to establishing an irrevocable trust to protect your assets and meet Medicaid eligibility guidelines. Remember, with an irrevocable trust, you no longer have control of the assets in the trust, and you cannot easily amend the terms. Additionally, Medicaid has a five-year “lookback” period when applying for benefits, meaning you must plan your Medicaid irrevocable trust well in advance for it to benefit you. Otherwise, you could trigger a penalty period that renders you ineligible for benefits for a set amount of time.

What an Estate Planning Attorney Can Do for You

Are you interested in establishing a qualifying trust to protect your assets and help you qualify for Medicaid benefits? Early planning is key. Contact Pennington Law, PLLC, today to speak with an experienced Arizona estate planning lawyer.