Friday, June 16, 2017
It is possible to preserve some of your estate for possible heirs while still maintaining eligibility for Medicaid. Placing assets in an irrevocable trust may shield assets from consideration for the Medicaid asset limit. A trust is a legal entity that splits legal and equitable title. The individual setting up the trust is the settlor (legal) or grantor (tax), the trustee has legal title, and the beneficiary has equitable title. It is possible for the settlor to retain equitable title and receive the benefits of the trust. An revocable trust leaves power with the settlor to end the trust and take back legal and equitable title. These types of trusts would not avoid consideration for Medicare eligibility. Irrevocable trusts cannot be ended by the settlor and may shielded from consideration for Medicare eligibility.
Income-only irrevocable trusts provide for the income earned by the trust to paid to the beneficiary, you in this case, while leaving the principal untouched and available for distribution to children or other putative heirs. Although the principal of this trust is not considered a resource for Medicaid purposes, if you move to a nursing home, the income will be paid to the nursing home. Be aware, this subset of trusts is very rigid and the settlor gives up significant power over the principal. Though trusts are versatile and may be excellent instruments for avoiding issues with Medicaid eligibility, it is extremely important to speak to an estate planner or an experienced trusts attorney before moving forward with this option.
See Isaac Yedid & Raymond Zeitoune, Planning Ahead For Medicaid Approval, Yeshiva World News, December 12, 2016.
Special thanks to Jim Hillhouse (Professional Legal Marketing (PLM, Inc.)) for bringing this article to my attention.