Careful estate planning can help older or disabled individuals obtain eligibility for Medicaid without depleting their assets, preserving some or all of their wealth while helping them avoid penalties. While the creation of trusts is an attractive solution for many Medicaid applicants, only certain types of trusts are effective for avoiding asset limits, and specific rules apply.

Nursing home expenses and healthcare costs can quickly drain a disabled or elderly person’s nest egg. The average cost of nursing home care has increased to approximately $97,000 annually, and premiums for long-term care and other types of insurance have escalated by as much as 94 percent. While Medicaid pays for a large amount of long-term and healthcare costs in the United States, it is necessary to have a low income and limited assets to qualify. For people with large amounts of money or valuable property, however, there are estate planning options that can help.

Transferring Assets into Trusts

Trust attorneys offer a wide variety of estate planning options to help individuals and their loved ones preserve their savings. But while some types of trusts will prevent assets from becoming considered when determining eligibility for Medicaid, others are ineffective. Even when the right type of trust is used to protect assets, a number of rules apply.

Irrevocable Living Trusts

An irrevocable trust can protect an estate from consideration or depletion when expensive health care costs and long-term care expenses add up. Since the individual no longer has control over the assets in an irrevocable living trust, a nursing home or medical provider cannot go after these assets to pay for care. And Medicaid does not consider these assets when determining eligibility. This is an effective option for people who want their hard-earned assets to benefit their family members, but the so-called ‘Look-Back’ rule can disqualify people from qualifying for Medicaid benefits for five years after transferring assets into an irrevocable trust. The actual disqualification period varies, however, and is dependent on the amount of wealth that is transferred to the trust.

Going forward, individuals should carefully consider their options before committing to a trust to protect their assets, and estate planning should be completed early in the game so that the look-back rule does not apply.