If you have made the wise choice to include Medicaid planning in your overall estate plan there is a good chance you will create a Medicaid trust as part of your planning. A Medicaid trust is an excellent addition to most estate plans. When drafted properly, a Medicaid trust can protect your assets as well as ensure eligibility for Medicaid benefits should you need them down the road. The disadvantages of a Medicaid trust, however, must also be considered before deciding to create one.
Medicaid planning is often incorporated into a comprehensive estate plan as a way to ensure that Medicaid benefits are available in the future if they are needed. Medicaid may be needed to cover the costs associated with long-term care given the fact neither Medicare nor most private health insurance policies cover those costs. The problem with Medicaid, however, is that the program has very low income and asset limits that cannot be exceeded to be eligible for benefits. The countable resources limit, for example, is just $2,000 for an individual applicant. If your countable resources exceed that limit you essentially have to expend those resources before Medicaid will begin providing benefits. In short, this means that you must use your life savings before Medicaid will help you – unless you planned ahead.
Medicaid planning involves incorporating perfectly legal strategies into your estate plan that protect your life savings while still diminishing the countable value of your estate to ensure eligibility for Medicaid. One strategy used in Medicaid planning is the creation of a Medicaid trust. A Medicaid trust takes assets out of your name, therefore removing them from your “countable resources” for purposes of qualifying for Medicaid.
The primary disadvantage to a Medicaid trust is that once those assets are transferred into the trust you no longer control them. They are considered property of the trust once transferred. You cannot access the principal of the trust after the trust is created; however, you may benefit from the trust in the form of regular dividends. Be careful though as those payments are considered income for purposes of Medicaid eligibility. In addition to the loss of control over trust assets, any assets left in the trust when you die may have to be used to reimburse the Medicaid program for covering the cost of care you received at a long-term care facility.
Because of the complex rules surrounding a Medicaid trust, it is always best to consult with your Missouri estate planning attorney to determine if a Medicaid trust is right for your estate plan.