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Does a living trust protect money from Medicaid consideration?
Molly Dworken 10/16/2012 05:33PM
A living trust does not protect assets from Medicaid consideration because the principal still has access to the money and controls how the funds are spent. The principal also has the option to revoke a living trust whenever he or she wants, and then use the money in it. Medicaid is not going to allow a person to stick money in a living trust, then qualify for Medicaid benefits to help pay for assisted living expenses only to have the person revoke the trust as soon as he or she is placed in a community.
One option for seniors looking to apply for Medicaid but wanting to protect their money is to utilize an irrevocable living trust. The person creating the trust is entitled to the income earned by the trust assets until death. The assets placed into the trust are not allowed to be used for the person's long-term care if that situation arises. Medicaid also has a 60-month look-back period at transfers into irrevocable living trusts and during this time the person is ineligible for Medicaid benefits.
An attractive benefit to the irrevocable living trust is that if laws change to make it more difficult for seniors to utilize asset protection planning, any assets in the established irrevocable trust are protected forever and not subject to the new law.