A Medicaid asset protection trust, frequently called a irrevocable income only trust, is a type of trust designed to protect a person’s assets from the costs of long-term care if that person is ever admitted into a nursing home.
For the most part, Medicare does not pay for long-term custodial care. A person needing such care pays privately until he or she becomes impoverished. Then Medicaid, the payor of last resort, covers a persons expenses. In order to become impoverished, currently $14,250 for a single person, you could give away all of your assets above that amount. However, all assets given away during the five year period prior to application for Medicaid are added back to determine whether a person has more than $14,250.
The purpose of creating a trust is to allow a person to give away their assets, but continue to enjoy them. To be effective, such a trust has to be created and funded at least five years before the creator applies for Medicaid.
The design and funding of these trusts is complex, but they do work. Call us for a consultation.
