You can use a Medicaid trust to protect assets from liquidation if a person requires an extended stay at a nursing home. In Pennsylvania, Medicaid limits might be enforced. When the trust works, long-term facility care won’t require upfront, often expensive costs. Assets get preserved to transfer to heirs. However, a Medicaid trust is an irrevocable document, so you don’t want to enter into one lightly.
How does the Medicaid trust work?
The trust simulates a gift, and it names children as beneficiaries and trustees. Contributions must go into the trust at least five years before the donor takes on long-term Medicaid benefits. Donors do not get penalized for asset transference to the trust. In addition, the existence of assets does not impact eligibility for Medicaid.
Medicaid trust considerations
An irrevocable trust is a great resource, but there are fundamentals to consider when assessing a Medicaid trust’s viability. First of all, the family dynamic is a major component. You need to be comfortable with the state of assets and how you distribute them. Any named beneficiary can use trust assets during the donor’s lifetime, with or without the donor’s consent, so do not appoint a trustee or beneficiary you cannot trust with your intentions and planning.
The terms of the trust impact tax and legal funding. You also want to factor in elder law and estate planning into your trust. Remember, financial advisors are often not tax professionals, but you want a comprehensive analysis managed by counsel familiar with real property, investments, and Medicaid planning.
Impact on care
The Medicaid trust preserves wealth, anticipating that donors may one day need government assistance for a portion of care. The trust can affect choices, quality, and type of care received. There’s also the concern for patient discrimination based on financial resources. The idea encompasses having different plans for individuals paying with Medicaid versus private funding.
Items like five-year waiting periods, tax implications, and choosing reliable trustees are a few obstacles to implementing a well-strategized Medicaid trust. When you approach the process smartly, everyone can benefit.