IMedicaid is government-run health coverage that is funded by the states and the federal government. It provides critical assistance to many millions of Americans. According to the Centers for Medicare & Medicaid Services, Medicaid provides healthcare coverage to over 85 million Americans. Medicaid coverage can also assume some of the financial costs that come with long-term care. Because there are asset limits on Medicaid eligibility, it is important to start Medicaid planning early and take the potential need for Medicaid long-term care coverage into account. For more information on Medicaid planning including how Medicaid and living trusts work, the Arizona trust attorneys at Harrison Law, PLLC can help. Feel free to call (480) 320-2310 to discuss your needs.
Who Needs Long-Term Care?
Individuals who start to experience a decline in their cognitive or physical abilities may find it challenging, even impossible, to live without the support of long-term care services. In some cases, an individual may need assistance on a daily basis only with light duties such as meal preparation or bathing. Others may need to reside in a long-term care facility.
Not every person will require the assistance of long-term care services, but the Administration on Aging (AoA) reports that as high as 70% of individuals aged 65 will at some point need long-term care. Additionally, even if a person does not require long-term care services at age 65, the older they become, the more likely that will change and they will need some type of long-term care support. Considering that the aging process naturally comes with the loss, to some extent, of one’s independence, the need for some type of long-term care is a reality for many people. Taking on the costs to pay for long-term care, though, can be daunting. This is where Medicaid can bear some of the financial load.
What Is a Medicaid Trust?
A Medicaid Trust, also sometimes called a Medicaid Asset Protection Trust (MAPT), is a type of irrevocable trust. Individuals needing Medicaid coverage can protect assets by establishing a Medicaid Trust while also meeting the asset limits of the program. The timeline for using this estate planning tool matters. To be effective, the trust must meet the following guidelines:
- For home care, the trust must be created 2.5 years prior to needing services.
- For nursing home care, the trust must be created five years prior to needing services.
Due to the complexity that comes along with Medicaid planning, having an experienced professional provide guidance can be helpful for individuals seeking to make the best choices for their personal needs. In Arizona, the estate planning attorneys at Harrison Law, PLLC are here for you to support your estate planning goals and answer your questions.
Medicaid Trusts Protect Assets
Medicaid Trusts are irrevocable trusts. This means that once they are created, for the most part, they cannot be changed. This is in contrast to revocable trusts that can be changed. The beauty of having an irrevocable trust is the protection of assets. A revocable trust does not protect assets from Medicaid.
When an individual makes a Medicaid Trust, a trustee must be named to manage the trust. This individual cannot be the person who created the trust or their spouse. All assets that fund the Medicaid Trust are considered to be for the beneficiaries of the trust. However, any income that the trust generates can be used by the individual that created it. This is one reason why it is significant to appoint the right trustee because it is the trustee’s job to make decisions on investing the assets held within the trust.
Pros and Cons of a Medicaid Trust
Medicaid and living trusts work well together for several reasons. First, certain assets like one’s home, and wealth in a checking or brokerage account can be put into the trust and safeguarded for beneficiaries. Placing assets in a trust can position a person to meet Medicaid’s asset limits, making it easier to meet Medicaid’s eligibility requirements. Wise investments of assets in the trust can create income for the grantor, the individual who created the trust. Upon the death of a grantor who is survived by their spouse, the surviving spouse can continue to earn any income from the trust. When the final spouse passes on, then all of the assets can be distributed to the named beneficiaries without having to go through the public and sometimes frustrating process of probate.
Individuals considering a living trust to protect their assets for purposes of Medicaid eligibility should be aware that income earned from the trust is taxable, and that assets placed in the trust are no longer available for use by the grantor.
Is a Medicaid Trust Right for You?
A Medicaid Trust may be right for some individuals, but not the best estate planning tool for others. A person who has the funds to comfortably pay for their own long-term care services should they need them may not want to lose access to their assets by putting them in a trust. A Medicaid Trust may also not work in instances where the overall estate plan has not been designed with Medicaid in mind. If an individual puts off updating their estate plan to include a MAPT until they find themselves needing long-term care, assets put into a trust will likely not be there long enough to meet the minimum threshold, and therefore they will not be protected.
Individuals who would not have sufficient funds on their own to pay for long-term care services could benefit by acting early to establish a Medicaid Trust. Doing so can help safeguard some of their estate for their beneficiaries while also allowing them to qualify for Medicaid coverage.
Estate Planning Attorneys in Arizona
No two people’s circumstances are the same. What will work for you may not be the best for another person. Given the high personal stakes of estate planning for future Medicaid coverage, the more you know about what options are available the better, especially because timing is critical should you elect to create a Medicaid Trust. To learn more about Medicaid and living trusts, call (480) 320-2310 today to set up a free consultation to speak with an Arizona estate planning attorney at Harrison Law, PLLC.
© 2023 Matthew W. Harrison and Harrison Law, PLLC All Rights Reserved
This website and article have been prepared by Harrison Law, PLLC for informational purposes only and does not, and is not intended to, constitute legal or financial advice. The information is not provided in the course of an attorney-client relationship and is not intended to substitute for legal advice from an attorney licensed in your jurisdiction.
