Trying to Shield Assets from Medicaid? Think Again.

“How can I shield assets from Medicaid eligibility tests?”

Protection of assets from Medicaid is central to any estate or elder planning, but it’s harder than it sounds to protect a house. Placing your house in a revocable land trust sounds like a good plan: put the house out of your hands, hopefully, put it out of Medicaid’s grasp. Not so fast.

A revocable land trust does not protect an asset from Medicaid’s spend-down requirements because of what’s in the name – it’s revocable. If a trust can be revoked or terminated at any time by the grantor, it’s subject to Medicaid eligibility tests. Medicaid is concerned, at least in part, with what the individual applying for Medicaid has in terms of assets, and more specifically what assets the applicant has control of.

A land trust is an agreement to place ownership of the property in the hands of a new entity, called a trust. That trust is overseen by an individual or entity referred to as a “trustee.” The person who puts assets into the trust (here, real estate) is called the “settlor” or “grantor.” The person who receives the benefit of the trust is called the “beneficiary.” A trust agreement outlines the relationship between trustee and beneficiary, and it is written by the settlor.

The confusing part is when one person wears more than one hat. In a revocable land trust, often, but not always, the “settlor” who created the trust and originally owned the land will also be the “beneficiary” of the trust entitled to use or benefit of the property for his or her life. Under the trust agreement, the trustee will have as much or as little power over the trust as the settlor provided.

Medicaid counts assets in revocable trust because the Medicaid applicant still has control of the assets in the trust by way of revocation. An applicant with valuable assets in revocable trusts will be denied by Medicaid until the applicant has “spent down” his or her assets to the point that the applicant has no more than $2,000 in assets in his or her name.

Medicaid does not count assets in irrevocable trusts depending on the terms of the trust and so long as the transfer to an irrevocable trust took place at least five years before the application for Medicaid was filed. If the transfer took place within the last five years, Medicaid penalty provisions will apply.

The creation of a trust is not always enough to protect your assets. Talk to an experienced elder law attorney with knowledge of Medicaid regulations to talk about what kind of trust is right for you, and when it needs to be created. Call our office and schedule a consultation to learn more, our number is 609-580-1044.