Paying for long-term care is a concern for many seniors, and Medicaid might be the answer for some of them. However, according to the American Council on Aging’s Medicaid Planning Assistance website, in 2017 an individual’s total income must be under $2,205 a month to qualify. That leaves some unable to pay for nursing home costs but ineligible for Medicaid. But with proper planning, even mid- to upper-income people can qualify, through what is called a Medicaid trust.
Proper Medicaid planning should be done with assistance from an elder care attorney. It requires transferring assets so that your income is under the threshold. But be careful: Medicaid imposes a five-year “look back” period, meaning that the individual must have qualified for Medicaid at all times during the past five years. That is why advance planning is critical.
Medicaid trusts take advantage of the fact that some assets are considered exempt—not to be used for the applicant’s care. They hold assets in trust so that they are not counted as part of a person’s Medicaid application. A typical Medicaid trust might cost between $5,000 and $10,000 to set up, plus yearly tax fees.
There are a few considerations to take into account:
- A revocable living trust is not the same as a Medicaid trust. It must be irrevocable, and the trust creator cannot be trustee.
- The timing and goal of transfers is critical. Consult an attorney.
- There are special kinds of trusts, such as a Qualified Income Trust, depending on the type of care needed.
- Medicaid is run jointly by the state and federal governments, so laws and eligibility vary by state.
You can read more about Medicaid trusts and their benefits here.