Some trust assets may disqualify a Medicaid applicant

One friend tells another, “Put your assets in a trust so the nursing home won’t take them.” But this technique isn’t necessarily the “magic bullet.” The concept of countable assets and resources is broader under Medicaid law  than it is under some other bodies of law. Placing your assets into a trust structure might avoid some problems — like probate in a state where probate estate administration requires ongoing aggravating  interaction with the probate court, or help with Veterans Pension eligibility, or to preserve them for your children while protecting them against the kids’ future creditors. Doing so doesn’t necessarily insulate the assets in the event you apply for Medicaid.

A “resource” is an asset other than income to which the Medicaid applicant or his/her spouse has the right, title and interest, and power to convert the asset to cash. If the applicant’s assets are in a trust, the trust can be counted as a resource if there are any circumstances under which the trust assets can be paid to/spent on the Medicaid applicant. So whether the assets that are sitting in a trust can be counted as resources is a crucial issue. Medicaid is a means-tested program with strict resource limits, and it can take a very long time to receive the Agency’s decision about the application. So it can be a nasty surprise to find out  months down the road that you never were eligible because the assets in the trust are countable resources.

This happened in a recent New Hampshire case. The applicant, Ms. Braiterman,  had transferred some of her assets to an irrevocable trust in 1994. Her children were the beneficiaries.She was not a beneficiary, and she had resigned as Trustee, but she had the retained  power to appoint herself as trustee. She also had the power to impose conditions on the trustee’s appointment of income or principal to the beneficiaries. Now this may have been a great plan with reference to estate tax/cost basis planning. But when she applied for Medicaid years later, the assets in the trust were counted,  so she had excess resources and her application was denied. Why? Because as a condition for the trustee to make a payment to her children, she could have required the trustee to obligate the children to spend the funds on her..

A similar result occurred in Washington State.  Margaret  Berto applied for Medicaid. She and her husband, who died before her, had transferred  their assets into a revocable living trust. In his Will he created a trust for her, so at his death, some of  the revocable trust’s assets were transferred to the testamentary trust. She was the co-trustee and she was the sole beneficiary. Presumably the assets in the revocable trust were spent down prior to the time she applied for Medicaid. The Trust was counted as an available resource, and eligibility for Medicaid was denied.

What makes the excess-resource cases even worse is that by the time the applicant receives the bad news, s/he and her spouse  may have amassed an enormous debt to  the nursing home.

 Careful planning can prevent a crisis. Medicaid planning requires careful evaluation of the specific Medicaid rules, which often compel a different plan than estate and tax

Call us for advice and representation on Medicaid eligibility planning, applications and  appeals…. 732 – 382-6070

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