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Trusts and Medicaid Planning



Trusts and Medicaid Planning

Trusts and Medicaid Planning

As you might already know, the cost of long-term care has risen tremendously over the last few decades, and it is still rising. In Virginia, the median monthly cost of longer-term care in a nursing home is $7,452 for a semi-private room and $8,517 for a private room. Most families cannot afford to pay these prices on their own for very long, so they must rely on Medicaid if and when long-term care is needed.

Medicaid Planning

Because Medicaid is a needs-based program, it has strict asset limits for eligibility. Therefore, a single individual, who is 65 or older and needs Medicaid to pay for a nursing home, may have no more than $2000 in “countable” assets when applying for Medicaid (more if he or she is married, but still only a limited amount).

Since $2000 in “countable” assets is not a lot, many seniors believe that in order to qualify for Medicaid benefits, they must spend down or give away almost all of their assets. However, proper Medicaid planning, performed with the assistance of a qualified elder law attorney, can enable elderly individuals and couples to keep most of their assets and still qualify for Medicaid, by exchanging “countable” assets for “non-countable” assets.

Trusts Used For Medicaid Planning

Medicaid planning often involves the use of Trusts. Whether the Trust can be used to help you qualify for Medicaid will depend on the terms of the Trust and who created it.

A Trust is simply a legal document that tells a Trustee how the assets held in the Trust can be used for the Trust beneficiaries. The Trustee can be an individual, attorney, bank, or Trust company.

Here are the most common types of Trusts used for Medicaid planning:

Irrevocable Trusts

An Irrevocable Trust is one that you cannot alter or modify once it has been created and that only allows limited control and access to the Trust assets.
For the purposes of Medicaid, assets held in an Irrevocable Trust will not count against your eligibility for Medicaid, as long as the Trustee cannot distribute the assets to you or your spouse.

However, a Revocable Trust may be altered or modified by its creator and is, therefore, considered a countable asset when determining Medicaid eligibility.

Bear in mind, if you are institutionalized in a nursing home or other long-term care facility, any income generated by an Irrevocable Trust must go to the nursing home to pay for your care.

Furthermore, transferring assets into an Irrevocable Trust within the five years prior to applying for Medicaid may trigger a period of ineligibility. The actual length of time you may be ineligible for Medicaid will depend on the value of the assets you transferred to the irrevocable Trust.

Testamentary Trusts

A Testamentary Trust one that is created by a Will. This kind of Trust, which is set up by a deceased person for the benefit of his or her surviving spouse, is protected from Medicaid, as long as any distributions from the Trust to the surviving spouse are at the Trustee’s discretion and not obligatory.

A TestamentaryTrust is an excellent way for a community spouse (the spouse at home) to leave assets to a surviving spouse who is in a nursing home. These assets can then be used for certain things that Medicaid will not cover, such as medical specialists, therapy, legal fees, and the cost of transferring to a different nursing home.

Income-Only Trusts

Income-only Trusts are used for just that—income. This type of Trust is set up so that it will pay an income to you for the rest of your life. Then, when you die, the remainder of the Trust assets will be transferred to your beneficiaries.

The income distributed to you with an Income-only Trust is protected and will not be counted as an asset for Medicaid purposes. But, if you do end up needing to spend time in a nursing home, the income will go to that nursing home to pay for your stay.

Special Needs Trusts

A Special Needs Trust is a type of Trust authorized by federal law whose assets don’t count for the purposes of Medicaid qualification. A Special Needs Trust, also known as a Supplemental Needs Trust, is one designed to supplement, instead of supplanting or diminishing, a disabled loved one’s eligibility for government assistance, such as Medicaid. Assets transferred into a Special Needs Trust are not counted against the disabled individual’s eligibility for Medicaid.

Consult With An Experienced Virginia Elder Care Attorney

If you think you will need Medicaid to pay for a nursing home in the future, don’t wait too long to plan. Advance Medicaid planning will allow you to protect your assets against the high cost of long-term care in advance and to preserve those assets for future generations. Contact Speedwell Law, PLLC at (703) 553-2577 to schedule an appointment with an experienced Virginia elder law attorney.

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The information on this site is for general informational purposes only. The information presented in this site is not legal advice or a legal opinion. You should seek the advice of legal counsel of your choice before acting upon any of the information in this site.