Age Gracefully With A Plan In Place

Trusts may be beneficial in Medicaid planning

On Behalf of | Apr 4, 2023 | Medicaid Planning |

As you approach retirement or begin planning for your long-term care, you might start thinking about Medicaid planning. Using trusts can be an effective way to preserve your assets while still qualifying for Medicaid benefits. 

There are various types of trusts you can use, depending on your specific needs and circumstances. 

Irrevocable Medicaid trust

An irrevocable Medicaid trust is a popular choice for protecting your assets. When you transfer assets into this type of trust, you relinquish control of those assets, so they won’t be counted as part of your estate for Medicaid eligibility purposes. The trust is managed by a trustee and can help you preserve your assets for your beneficiaries while still meeting strict financial eligibility requirements.

Income-only trust

An income-only trust, also known as a Medicaid income trust, is designed to hold your income-producing assets, such as rental properties or dividend-paying stocks. The trust allows you to receive the income generated by the assets, but not the assets themselves. 

Special needs trust

If you have a disabled family member who relies on Medicaid benefits, a special needs trust can be an effective way to provide additional support without jeopardizing their eligibility. Assets placed in a special needs trust are not counted for Medicaid purposes, and the trustee can use the trust funds to pay for supplemental needs not covered by Medicaid, such as transportation, education or entertainment.

Pooled trust

A pooled trust is a type of special needs trust managed by a non-profit organization. These trusts pool the resources of multiple beneficiaries, allowing for more efficient management and investment of the funds. 

Remember, there’s a five-year look-back period for Medicaid eligibility. This means that any asset transfers made within five years of applying for Medicaid can be subject to penalties, such as a period of ineligibility. Therefore, it’s crucial to plan early so you can protect your eligibility for this asset-based program.