Estate Planning For Peace Of Mind

How a Medicaid trust can help secure long-term nursing care

On Behalf of | Aug 26, 2021 | Elder Law, Estate Planning |

Many middle-class Texas residents face a conundrum as they get older: they don’t have enough money to pay for long-term care insurance, but they have too much income to qualify for Medicaid. How will they pay for long-term care expenses? One way to do it is to create a Medicaid trust.

How does a Medicaid trust protect your assets

A Medicaid trust is a little-known tool in elder law that allows you to place a variety of assets inside it, so you don’t have to use the value of your holdings to pay for long-term care. Many different types of assets qualify, including 401k and other retirement accounts, primary residents, vehicles, personal belongings and more. The goal is to put enough assets into the trust so that your income falls into the range that allows you to qualify for Medicaid. If you require long-term care, you won’t have to pay for it with your assets. Instead, the money comes from Medicaid.

Not all trust types qualify

Trusts are a useful tool in estate planning. However, you must take care when setting up a Medicaid trust. These are irrevocable trusts, which means you cannot change the details of the trust once you have established it. Legally, you no longer own the assets in the trust; instead, the trustee does, which is why those assets are protected from creditors.

When creating a Medicaid trust, be sure that your trustee is a reputable individual who will administer the assets according to your wish should you become mentally incapacitated. another pitfall is that you can’t set up a Medicaid trust and immediately use it to protect long-term care costs. Medicaid has a five-year paydown period, so make sure you set up the trust well in advance to protect your assets.