Most people are aware of the fact that Medicaid is a government health insurance program that is in place to help people who are financially needy.
If you have worked throughout your life, you will qualify for Medicare when you reach the age of 65. Medicare also provides health insurance, so you wouldn’t need Medicaid if you are enrolled in the Medicare program, right?
The answer is that you probably would not need it at first, and you probably wouldn’t qualify, because there are very modest income and asset limits. However, Medicaid does become important for many seniors, because Medicare does not pay for custodial care.
If you were to need help with your activities of daily living, this would be looked upon as custodial care rather than medical or convalescent care. As a result, Medicare would not pick up the tab.
If you were to use all of your assets paying for long-term care, you would have nothing left, and you would qualify for Medicaid to pay for the rest of the care. Your children would not receive inheritances.
Elder law attorneys help people who want to qualify for Medicaid to pay for long-term care without losing everything in the process. To this end you could in a sense give your children their inheritances in advance, and you would have little left in your own name when you apply for Medicaid.
The fly in the ointment is the five year look-back. Your application will be denied if you give away assets within five years of applying, so you have to act in advance.
There are various different ways that you can divest yourself of assets. You could give direct gifts, but you could alternately fund a Medicaid trust.
When you place assets into a Medicaid trust, you are removing these resources from your personal possession. As a result, they would not be counted when Medicaid was determining your eligibility.
There are different types of trusts. There are revocable trusts, and there are irrevocable trusts. You can dissolve or rescind a revocable trust, and you can take back personal possession of the assets if you choose to do so.
However, because you do retain this level of direct control, Medicaid would count assets that have been conveyed into a revocable trust.
A Medicaid trust would be an irrevocable trust. You cannot dissolve an irrevocable trust, so you can’t decide to take back the assets in a Medicaid trust if you find that you never need long-term care.
This does not mean that Medicaid trusts are not useful. There are income-only Medicaid trusts that allow you to draw income from the earnings of the trust throughout your life.
Medicaid Planning Consultation
If you would like to learn more about the pros and cons of Medicaid trusts, send us a message through this page to request a free consultation: Indianapolis IN Elder Law Attorneys.
Mr. Kraft assists clients primarily in the areas of estate planning and administration, Medicaid planning, federal and state taxation, real estate and corporate law, bringing the added perspective of an accounting background to his work.