Will Placing My Assets in Trust Preserve My Medicaid Eligibility?

New York’s Medicaid program has strict eligibility requirements. An applicant’s income and overall “resource level” must remain below a certain threshold. But with proper asset protection planning, it is possible for individuals whose resources exceed the threshold to obtain or retain their Medicaid eligibility.

One question we often get is, “Can I protect my Medicaid eligibility by putting all of my assets into a trust?” The answer to this question depends on the exact type of trust involved. In estate planning there are basically two general categories of trusts, revocable and irrevocable.

Revocable vs. Irrevocable Trusts

First, let’s establish what we mean by a trust. A trust is a legal document you sign that transfers control over certain assets to a trustee. The trustee is then required to manage or distribute those assets in accordance with the trust’s instructions.

A revocable trust means the person making the trust–often known as “the settlor”–can amend or revoke the trust at any point during their lifetime. In addition, the settlor often serves as the trustee of the revocable trust. So in practice, the settlor effectively retains control over the trust’s assets.

With an irrevocable trust, in contrast, the settlor and the trustee are different persons. The settlor also gives up the right to amend or revoke the trust once it takes effect. But the settlor may structure the trust in such a way as to benefit from the assets. For example, an irrevocable trust might say the trustee must pay over any income from the trust’s assets to the settlor, while the principal remains in trust.

The Impact on Medicaid Eligibility

So how does all of this affect Medicaid eligibility? Basically, Medicaid looks at an applicant’s total available “resources.” That is, what assets are under the applicant’s control and available to pay for their medical expenses?

In the case of a revocable trust, Medicaid will generally consider all of the trust’s assets as resources of the settlor. Since the settlor is free to revoke the trust at any point, and thus retains control over the assets, the revocable trust itself does not “shield” the assets from Medicaid’s resource calculations.

With respect to an irrevocable trust, things are a bit more complicated. If the irrevocable trust provides no way for the settlor to obtain any payment or benefit from the trust, then Medicaid will not consider it a resource of the settlor. But to use the hypothetical example discussed above, if the irrevocable trust pays the income from the trust’s assets to the settlor, then those payments would count against the settlor’s Medicaid eligibility limits.

Speak with a New York Estate Planning Attorney Today

The takeaway from all this is you should not simply assume that placing assets into a trust will preserve Medicaid eligibility. Trusts can still be a useful estate planning and asset protection device. But you need to work with an experienced Westchester County asset protection lawyer who can review your unique situation and advise you on the best course of action. Contact Meyer & Spencer, PC, to schedule a consultation.

Source:

health.ny.gov/health_care/medicaid/

https://www.meyer-spencer.com/what-is-a-medicaid-look-back-period/