You have probably heard many disturbing tales of Medicaid seizing people’s homes when they pass away after a long stay in a nursing facility. Medicaid rules are complicated and vary from state to state, with important aspects buried in the middle of page after page of jargon-ridden text. When you are in a hurry to secure care for yourself or a loved one in a nursing home, it is natural to simply sign the papers and move on. Two of these important yet overlooked rules is the Medicaid Estate Recovery and look-back period.

To be eligible for Medicaid, an individual cannot have more than $2000 in countable assets and must make under $2349 in monthly income. Some people will attempt to spend down their assets by giving them away to friends or family to reduce the amount they own. Others resort to estate planning strategies such as living trusts to downsize their assets.

What is the Medicaid Recovery Program?

First, it is important to understand the Medicaid Estate Recovery program. While the person on Medicaid is still living, his or her real estate property – specifically the primary place of residence and any other properties that are for rent – are not counted towards Medicaid eligibility. However, that changes once the person passes away, and if the real estate assets are part of the person’s probate estate, Medicaid can go after them to recover funds paid on the decedent’s behalf. In other words, through Medicaid, the government “loans” money for your long-term care at a nursing home, and has the right to collect it after you die.

What are the Benefits of a Trust When Medicaid is Involved?

This leads to many people wondering if setting up a living trust would protect their home and other assets from Medicaid recovery. The answer is – it depends. Setting up a trust is something that needs to be done carefully and will likely require the help of a professional. You will also need to choose the right kind of trust and make sure the individual selected as a trustee is reliable and will act in good faith.

There are two main types of living trusts – revocable and irrevocable. Simply put, a revocable trust can be altered or undone at any time, and assets placed into will still be counted by Medicaid. When you create an irrevocable trust, you transfer ownership of your assets to the trust, and those assets will no longer be in your name and will not be counted by Medicaid.

That means setting up an irrevocable trust might be a good strategy to ensure you can preserve your assets and pass them on to your heirs after you die while keeping them out of reach from Medicaid estate recovery. However, if you set up your trust within 5 years before applying for Medicaid, it may still fall into Medicaid’s look-back period: even if you place your assets into an irrevocable trust, they are seen as gifts and may still make you ineligible for Medicaid or result in delayed eligibility.

Why is a Lawyer Helpful to the Process?

Medicaid planning is a complicated aspect of estate planning and should be addressed early – even before you need nursing care. With the help of an Elder Law attorney, you can feel confident you will receive the care you need if and when the time comes, and that you will still have an estate to pass on to your loved ones. Contact the Johnson Law Firm, PC to get answers to your questions and begin crafting a plan to safeguard your family’s future.