If you know in advance that you will likely need to go to a nursing home in the future, you should start Medicaid planning right away. The qualifications for Medicaid are very strict, and many seniors simultaneously have too many assets to qualify and not enough available funds for long-term care. The only way to get around this conundrum is through effective Medicaid planning, which usually involves the use of trusts.
There are many different types of trusts, but most of them are not appropriate for Medicaid planning. For example, rolling assets into a revocable living trust does not remove your control of the funds, and therefore they are still considered when qualifying for Medicaid.
Instead, you must use irrevocable trusts to remove your control of the funds so that they are not considered assets when calculating Medicaid eligibility. A typical Medicaid Asset Protection Trust can work if an individual’s assets are worth too much to allow the individual to qualify for Medicaid, while a Qualified Income Trust assists individuals that normally fall through the cracks due to too much income.
Irrevocable Trusts Planned Years in Advance Are Your Best Option
If you are able to plan in advance, transferring assets into an irrevocable trust keeps them separate from your own assets and income. As such, assets in irrevocable trusts are not generally considered as countable assets for Medicaid qualification purposes. However, transferring assets to the trust is considered a gift to the trust, and if the transfer was made less than 5 years before the application is submitted, that gift can significantly delay the start of Medicaid payments.
Qualified Income Trusts
If you have quite a bit of income from pensions, social security, and other income sources, you will have a difficult time qualifying for Medicaid. Even if your overall assets are under the limit, you may not qualify for Medicaid payments for long-term care due to your monthly income. When this is the case, you are offered one last option for getting into a Medicaid-paid nursing home.
A qualified income trust (sometimes called a “Miller Trust”) is designed specifically for this purpose. This is a very restricted irrevocable trust to which your monthly income will be deposited. Once deposited, the funds will immediately be used to pay for nursing homes, medical care, and Medicare premiums. Any funds left in the trust at the end of your life are released to the state of New Mexico for reimbursement of your care.
Choosing the right type of trust, or using a combination of these, is best done with the advice of an attorney. Contact us today to learn more or set up your consultation.