Attorneys At Kreisher Marshall & Associates, LLC

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Medicaid asset protection trusts

On Behalf of | Oct 20, 2021 | Elder Law

As a resident of Pennsylvania, you might have an older loved one who needs assistance. It’s common to have an elderly parent or grandparent who has medical issues and needs a helping hand in the event that they have to go into a nursing home. A Medicaid asset protection trust might be the best option available.

What is a Medicaid asset protection trust?

A Medicaid asset protection trust is a type of trust that is also known as an income-only irrevocable trust. It is created for the purpose of protecting the assets of a person who might otherwise not qualify for long-term medical care through Medicaid. This type of trust must be created at least five years before a person has to go into a nursing home.

How does a Medicaid asset protection trust work?

As a type of irrevocable trust, a Medicaid asset protection trust works by having the person’s assets put into the trust. This makes those assets considered as gifts to designated beneficiaries and protects them. While it’s possible to remove assets from this type of trust, it’s advised not to do that as the assets no longer have protection once removed.

The person who creates the trust, the grantor, is required to name a person to serve as the trustee. The trustee will oversee the Medicaid asset protection trust. Often, assets that are held in the trust are there to stay protected so that the person’s loved ones can eventually receive them.

The purpose of placing the assets into the Medicaid asset protection trust is to prevent them from being depleted when there’s a chance of needing long-term care. Additionally, a person might otherwise not qualify for Medicaid at all if their assets are too high. When applying for Medicaid, if the assets are already in the trust for five years, there is no questioning about what happened to the person’s assets. The assets are not hidden as the person who applies for assistance through Medicaid reports the existence of the trust.

A Medicaid asset protection trust can be a lifesaver for an older person who needs long-term assistance when they enter a nursing home. The trust has a twofold benefit in allowing them to qualify for Medicaid while also protecting their assets for their beneficiaries.