Medicaid is a government program that pays the bills for most people in long-term care. Qualifying for Medicaid, however, requires that you have next to nothing left in terms of income or assets. In Illinois and other states, the system forces you to spend your life savings and liquidate your estate to pay for nursing care before the federal government can cover the expense. An estate planning tool known as a Medicaid trust offers a method for shielding assets in this regard.
Assets that you can put in Medicaid trust
The Medicaid system has countable and non-countable assets. Countable assets must be depleted before you can qualify for coverage unless you put them in a trust.
Countable assets include:
- Checking and savings accounts
- Stocks and bonds
- Certificates of deposit
- Money market accounts
- Real estate other than your primary residence
Due to the complexity of Medicaid rules, you need to analyze your estate carefully to determine which assets stand in the way of qualifying.
The importance of planning ahead
You cannot put together a Medicaid trust at the last minute when you discover that you need long-term care. Medicaid has a look-back period of at least five years. The government looks at your previous financial actions to see if you were trying to become Medicaid-eligible when you actually have the means to pay a nursing home.
What kind of trust is a Medicaid trust?
An irrevocable trust that the grantor cannot alter or act as trustee under could qualify as a Medicaid trust. To achieve your purpose, you must ensure that your trust complies with Medicaid rules. Many trusts that people set up for estate planning purposes do not work for Medicaid planning because the grantors still technically own the assets in the trust.