The Value of Medicaid Asset Protection and Qualified Income Trusts
This past week, I had a 74-year-old client and her 78-year-old husband ask me if they should replace their current Joint Revocable Living Trust with a Joint Irrevocable Trust.
In this couple’s case, it made sense to replace their Living Trust with an Irrevocable Trust, often called a Medicaid Asset Protection Trust (“MAPT”). They are both in good health, and therefore there is a good chance they will not require long-term care during the Medicaid five-year look-back period.
The new MAPT is funded with the couple’s assets so that the assets will not be counted towards the minuscule Medicaid asset eligibility limits.
But Medicaid considers assets AND income when assessing one’s eligibility for long-term care.
Therefore, when the couple is ready to apply for Medicaid at least five years from when they funded the MAPT, they will create a Qualified Income Trust (a “QIT”), funded with income that exceeds the Medicaid income eligibility limits.
With a MAPT and QIT properly created and funded, this couple will be in a position to successfully apply for Medicaid coverage when they need it.
Thus, they will be able to leave a sizable inheritance to their loved ones, rather than having to deplete their entire life savings on skyrocketing nursing home and/or assisted living facility costs.
Medicaid is a government-funded program that provides health insurance coverage to low-income individuals and families. While Medicaid is a valuable resource for those in need, it can also present challenges for those who have assets or income that may affect their eligibility for benefits. This is where Medicaid asset protection and qualified income trusts come into play.
Medicaid asset protection is the process of legally transferring or protecting assets so that they are not counted towards the Medicaid eligibility requirements. This can include transferring assets to a trust, gifting assets to family members, or spending down assets on necessary expenses. The goal of Medicaid asset protection is to ensure that individuals and families are able to access the benefits they need while also preserving their assets for future generations.
One type of trust that can be used for Medicaid asset protection is a qualified income trust, also known as a Miller trust. These trusts are specifically designed for individuals with high income levels that may make them ineligible for Medicaid. A qualified income trust allows the individual to place their income into the trust, which then pays for their medical expenses. This way, the individual’s income is not counted towards the Medicaid eligibility requirements and they are able to access the benefits they need.
Another type of trust that can be used for Medicaid asset protection is a special needs trust. This type of trust is specifically designed for individuals with disabilities or chronic health conditions. The trust is used to hold assets that are protected from being counted towards the Medicaid eligibility requirements. The assets in the trust can be used to pay for things like medical expenses, therapy, and other necessary services that are not covered by Medicaid.
In conclusion, Medicaid asset protection and qualified income trusts are valuable tools for individuals and families who need to access Medicaid benefits while also preserving their assets. These trusts can help ensure that individuals and families are able to access the benefits they need while also preserving their assets for future generations.