Individuals preparing for retirement often need to think about a variety of possible scenarios. They may need to plan for incapacity by establishing durable powers of attorney and advance directives. They may need to think about the possibility of major medical expenses, such as the cost of living in a nursing home.
While most retired professionals and their spouses qualify for Medicare coverage when they stop working, Medicare cannot cover all of the medical expenses retired adults incur. Medicare typically does not cover long-term care expenses. Instead, older adults hoping to use government benefits for nursing home care and similar support need to prepare to apply for Medicaid. That process frequently involves establishing a trust at least five years before the applicant needs Medicaid benefits.
How can a trust help an older adult who might need Medicaid?
Trusts diminish personal holdings
When an individual applies for Medicaid, the state looks at both income and countable assets. The amount of money in a bank account and other resources that people could easily liquidate can affect their eligibility for Medicaid benefits. When people use their assets to fund trusts, they are no longer the owners of their assets. People can significantly reduce their personal holdings by transferring them to a trust. They may then have a much easier time qualifying for Medicaid should they require intensive support later in life.
Trusts protect vulnerable assets during probate
It is possible to qualify for Medicaid with certain high-value resources, such as a primary residence. However, those assets could be at risk of estate recovery efforts later. Using real property and other potentially vulnerable assets to fund a Medicaid Trust can protect those resources from estate recovery efforts later. In other words, those resources can pass to beneficiaries instead of going to repay the benefits received by an older adult prior to their death.
Taking the time to establish a Medicaid trust before benefits become necessary can help people qualify for support and minimize the financial consequences of using Medicaid benefits. Properly planning for Medicaid eligibility ahead of time can give people peace of mind and can allow them to leave a meaningful legacy after they die.
