Medicaid is a government program that provides health care coverage to people with limited income and resources. To qualify, you must meet strict eligibility criteria, which include limits on your income and assets. For many applicants, this means reducing their countable assets below specific thresholds. Without planning, this could require spending down your savings or selling valuable property to dip below the thresholds.
Trusts play a key role in meeting these requirements by legally shielding certain assets from counting toward the thresholds. In other words, you can qualify for Medicaid by placing your assets in a trust, which allows you to reduce your assets while retaining access to the funds.
Types of Trusts Commonly Used in Medicaid Planning
Trusts play a key role in Medicaid planning because they allow you to qualify for benefits while protecting your assets. Each type of trust serves a specific purpose, and choosing the right one depends on your goals and circumstances. Here are some common examples of trusts used in Medicaid planning:
- Irrevocable Medicaid Asset Protection Trusts: This type of trust protects assets from being counted for Medicaid eligibility. Once you transfer assets into an irrevocable trust, you no longer own or control them. By doing this at least five years before applying for Medicaid, you can meet the program’s financial requirements while still benefiting from trust income or other provisions.
- Special Needs Trusts: Families use special needs trusts to provide for loved ones with disabilities. These trusts preserve eligibility for Medicaid and other government benefits while allowing beneficiaries to receive funds from the trusts for non-covered expenses like transportation, education, or entertainment.
- Testamentary Trusts: These trusts go into effect after your death and are created through specific instructions in your will. They can protect assets for surviving spouses or other beneficiaries while allowing them to qualify for Medicaid.
- Income-Only Trusts: These trusts allow you to transfer assets into a trust but continue to receive income from those assets during your lifetime. This structure can reduce your countable assets for Medicaid while still providing a steady income stream.
The Look-Back Period and Its Impact on Medicaid Planning
The look-back period is a critical factor in Medicaid planning. When someone applies for Medicaid, the state reviews their financial transactions over the past five years to check for asset transfers. If records show that the applicant transferred assets or sold them below market value during this time, Medicaid imposes a penalty. This penalty delays eligibility for benefits based on the value of the transferred assets.
For example, gifting money or transferring property to family members without proper planning can trigger this penalty. Trusts can prevent look-back period issues when you establish them well in advance. By transferring assets into an irrevocable trust outside the five-year window, families can protect those assets and avoid penalties.
How an Estate Planning Lawyer Can Help
Mistakes in the Medicaid planning process can result in delays, penalties, or even a denial of benefits. Working with an experienced trust lawyer is the best way to avoid common pitfalls and ensure that your plans align with state and federal laws. Here’s how a lawyer can assist you:
- Reviewing your financial situation to identify assets that could affect Medicaid eligibility
- Drafting trusts to shield your assets from Medicaid’s asset limits
- Transferring property into trusts to remove it from your countable assets
- Analyzing past transactions to address potential issues with the look-back period
- Structuring trusts to ensure they comply with Massachusetts Medicaid rules
- Updating existing estate plans to align with Medicaid planning goals
- Advising you on income limits and how to structure trusts to manage excess income
- Handling the Medicaid application process on your behalf
Contact a Medicaid Planning Attorney Now
Take control of your Medicaid planning today by reaching out to Surprenant & Beneski, P.C. Our experienced team can help you protect your assets and qualify for the benefits you need. Call us now to arrange your initial consultation and start planning for the future.
