The Medicaid rules to financially qualify for in-home care, assisted living, and nursing home care are notoriously complicated. Unfortunately, the rules aren’t any simpler for assets held in a trust. Assets in some trusts are exempt and don’t impact Medicaid eligibility, while assets in other trusts are countable and prevent someone from qualifying for Medicaid.
There are many different types of trusts, and Medicaid views each trust very differently depending on a number of factors. They include: who created the trust; who is the trustee; who is the beneficiary; what rights the beneficiary has to the assets in the trust; and when the trust was created.
These are the most common types of trusts you or your clients may have, and whether Medicaid will count the assets in those trusts:
1. Revocable Trusts. This is the type of trust you or your clients likely have. The person who created the trust (i.e. the grantor) can revoke or change the trust at any time. This trust is used to avoid probate and make the administration process as smooth as possible when the grantor passes. Medicaid treats revocable trusts as if the grantor still owns the assets. In other words, all of the trust assets are counted and it provides no protection from Medicaid.
2. Irrevocable Trusts. There are many types of irrevocable trusts, but the most common is known as a “Medicaid asset protection trust.” The purpose of this trust is to protect assets from having to be spent down for Medicaid. The beneficiary of the trust must be someone other than the grantor. It’s commonly the children of the person who set up the trust. The trust should have a child or another person as the trustee rather than the grantor. If the trust is created and the assets are transferred to it at least 5 years before applying for Medicaid, they should be protected from Medicaid. However, it’s important to note that how the trust assets are used and who they benefit can still be a factor and cause them to be counted for Medicaid.
3. Testamentary Trusts. This is a trust created at someone’s passing. Stated another way, the grantor has passed and there’s now a trustee who is administering the trust for a beneficiary. Unfortunately, this is one of the most complicated trusts under the Medicaid rules. Medicaid will evaluate who created the trust and who the trustee is to determine whether the assets are counted. If the trustee is also the beneficiary and can directly access the trust, the assets will be counted. On the other hand, if the trustee is not the beneficiary and has full discretion (i.e., control) over the trust, the assets in that trust shouldn’t be counted. That being said, there are many variations between these two types of testamentary trusts, so it’s very important to have the trust reviewed by an elder law attorney to understand whether the assets will be counted and qualify the beneficiary for Medicaid.
If you have any questions about Medicaid and whether it will count the assets in a trust, feel free to contact me at phmulder@cunninghamdalman.com.
