A Medicaid trust is a valuable tool that can enable you to qualify for Medicaid and preserve your estate at the same time. Before jumping in, here is what you need to know about the different types of Medicaid trusts and how they operate.
The Basics of a Medicaid Trust
Medicaid trusts have two different core categories—revocable and irrevocable. Irrevocable trusts can’t be changed after they are created, hence the name. These trusts are designed so that all income will be payable to you to use towards your personal living expenses. Any principal will be inherited by your heirs and is fully protected. Income, like pensions or Social Security payments, will go to the nursing home.
Revocable trusts can be changed or retracted by the individual that created it. The funds that make up a revocable trust also are counted when determining Medicaid eligibility, so they cannot be used in Medicaid planning.
The Most Common Types of Medicaid Trusts to Protect Your Assets
- Medicaid Asset Protection Trusts: These trusts can protect client assets and still allow seniors to qualify for Medicaid benefits. The creator of this trust can’t access the principal. Any income from assets is given to the creator or spouse and factored in as a resource by Medicaid. The creator can alter trustees at any point.
- Income-Only Trusts: In this trust, the owner will transfer money into the trust instead of to their children. The creator and spouse will not have access to the trust principal, but trustees can make distributions to third parties, including children. The income from the trust can be paid to the creator and spouse and will be counted when determining their eligibility for Medicaid.
- Testamentary Trusts: If a spouse’s will leaves 100% of property and assets to a wife or husband, all of those assets could be factors in Medicaid. Testamentary trusts allow assets to be redistributed and can pay for anything that a surviving spouse needs without facing consequences from Medicaid.
- Supplemental Needs Trusts: These trusts allow people with disabilities to keep their eligibility for Medicaid benefits. The beneficiary can receive Medicaid benefits without the funds in the trust being factored in whether or not someone is eligible for Medicaid.
Consult with a Trust Expert at Miles Tax Advisory
If you aren’t sure how to create a Medicaid trust and protect your assets, you should contact Miles Tax Advisory today. We can work you through all of your options and help you determine what to do. We are always here to assist you!