Reasons to utilize a Medicaid asset protection trust

On Behalf of | Feb 15, 2021 | Medicaid Planning |

Planning ahead for any long-term care that you may need in the future is the key to protecting your assets. In between the high cost of long-term care and Medicaid’s eligibility requirements, a failure to plan accordingly may result in the loss of your assets.

A Medicaid asset protection trust can allow you to protect certain assets and still qualify for Medicaid. Most assets outside of this type of trust must be “spent down” before you can qualify.

Protecting your assets with a trust

When someone who receives Medicaid passes away, Medicaid then attempts to collect eligible assets as reimbursement for provided services. According to the American Council on Aging’s Medicaid website, the assets held in a Medicaid asset protection trust are exempt from collection attempts. This feature extends to any beneficiaries that you list on the trust.

Preserving your home and passing it on

You can place many types of assets into these trusts. Perhaps the most important, however, is your home. Once you set up the trust and place your home in it, Medicaid becomes unable to claim your residence for reimbursement.

If you include family members that live with you as beneficiaries on the trust, this means that they can inherit the house. Otherwise, Medicaid will force them to sell the home.

Planning ahead of time is essential

For all of the wonderful things that these types of trusts can accomplish, it means nothing if you do not plan ahead. Medicaid has a five-year lookback period when it comes to collecting assets. For a Medicaid asset protection trust to hold up, you must set it up at least five years before you need to qualify for Medicaid.

If you establish a trust that falls within the lookback period, most of those assets will be subject to collection.