Preserving Medicaid eligibility with trusts

On Behalf of | May 20, 2021 | Estate Planning |

Many individuals assume that estate planning only has to do with drafting a will documenting what they’d like to pass on to their loved ones when they die. There’s so much more to this process, though.

Good estate planning involves looking at all your potential future needs, including things like Medicaid eligibility.

Planning for Medicaid eligibility isn’t always easy

Not just anyone qualifies for Medicaid. They must instead have limited assets and income. You may not be eligible for Medicaid if you have too many resources in your name.

Funding a trust as part of your estate plan can aid you in preserving your eligibility for Medicaid. You may want to consider two different trusts:

  • Qualified Income Trust: You can fund this irrevocable trust with excess funds. How much you may “spend down” the trust varies by jurisdiction. You may be able to get around those limits by adding additional assets into the trust. Your trustee is responsible for distributing assets to pay for your reasonable expenses as they arise.
  • Asset Protection Trust: You can place both valuable items and money into this trust. Your beneficiaries benefit from not paying capital gains taxes if your assets increase in fair market value. One downside to this trust is that you relinquish rights to your assets when you place them in this trust.

Both of these are viable solutions that can prevent problems for you in the future.

How to decide what trust is best for preserving your Medicaid eligibility

There are many different trusts that can be useful in estate planning. Deciding which one will be right for preserving your eligibility for Medicaid can be challenging. An attorney will likely ask some additional questions about your financial resources and goals before advising you what trust option is best in your situation.