Medicaid Asset Protection Trusts

Medicaid Asset Protection Trusts

Medicaid Asset Protection Trusts can help protect assets from the costs of long-term care.

70% of people 65 years of age or older will need long-term care.¹  Most people cannot afford to pay $80,300 per year for long-term care.  That is the national average, $80,300 per year.¹  Our area of Southeast Kansas may help to bring that national average down.  Kansas publishes nursing facility Medicaid rates for the public (found here).  The Kansas Medicaid rates, which are usually less than private pay rates, are cost prohibitive for many families under any long-term arrangement.

One of the options provided by the Medicaid laws are special irrevocable trusts.  These irrevocable trusts (Medicaid Asset Protection Trusts) are special because they must have special provisions as defined in the Medicaid laws.  When properly created and managed, these irrevocable trusts can make assets held by the trust unavailable for Medicaid.  Usually these irrevocable trusts will be structured to protect the principal while distributing the income to the creator(s).  In this situation, if the creator(s) do enter a long-term care facility then the principal of the trust is what is unavailable for Medicaid resource calculations.  Under these facts, the income produced by the assets held by the trust would be paid to the nursing home.  However, your children or other beneficiaries may be named to receive the income and in that situation, assuming all other requirements are met, the income would flow to those named beneficiaries and not the nursing home.

These irrevocable trusts are useful for planning purposes prior to requiring Medicaid but may also be combined with other planning strategies to provide both asset protection and legacy planning.  These trusts should not be confused the the revocable living trust (found here) because any assets held by a revocable living trust are included in Medicaid resource calculations.   Furthermore, any assets held in a revocable living trust will also be available for estate recovery.

¹ – Genworth Cost of Care Survey 2015.

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