Although you may still qualify for Medicaid benefits and own your home, you should understand that Medicaid still has the option of imposing a lien on your home if you receive benefits for nursing home services. Medicaid can also collect against your estate after you pass away. For that reason, it is important to understand the different options in Medicaid planning that are available to you. If your goal is to protect your assets for your heirs, one of the best options is an irrevocable Medicaid trust. Let our Overland Park Medicaid lawyers help you create that trust.
How Medicaid trusts work
Medicaid trusts are special types of trusts frequently used to provide protection for assets when someone needs long-term care and wants to apply for Medicaid benefits. Using the trust properly will allow you to maintain your eligibility for Medicaid without having to relinquish your home. A Medicaid trust must be an irrevocable trust that names you as the income beneficiary. The trust will also name residual beneficiaries who will ultimately receive the trust property at your death. There are benefits to using these trusts both during your lifetime and after your death.
Benefits of having a Medicaid trust during your lifetime
If you have a properly drafted Medicaid trust, you will be entitled to many benefits during your lifetime. For example, an irrevocable Medicaid trust allows you to stay in your home as long as you and your spouse are living. You also have the right to create an “income only” trust that collects rent from properties included in the trust. This is something our Overland Park Medicaid lawyers believe you should consider.
Selling your home during your lifetime
If you sell your home during your lifetime, there are a few things you should know. First, you retain the ability to use the applicable capital gains tax exclusion, which can be useful in your Medicaid planning. You can also purchase a new home for your benefit. Be sure that the trustee does not give the trust principal directly to you or your spouse, but instead use the assets for the benefit of other beneficiaries such as your children or grandchildren. You can also retain a limited right to change your trustee during your lifetime.
Remember that, for Medicaid planning purposes, transfers of property to a Medicaid trust need to be completed as soon as possible, in light of the Medicaid five-year look-back period. The look-back period applies when nursing home services are involved. When you transfer assets to your Medicaid trust, the five-year look-back period starts to run. If you have questions or concerns about this part of Medicaid planning, speak to one of our Overland Park Medicaid lawyers.
Benefits of a Medicaid trust after your death
Once both you and your spouse pass away, the assets in the Medicaid trust will be distributed based on the instructions provided in the trust agreement. If your Medicaid trust includes a limited power of appointment, then you can modify your beneficiaries through your last will and testament or some other estate planning document. As a result, you can retain some control over the ultimate disposition of your trust property. It also means your home will be included in your estate after your death and will receive a step-up in basis for purposes of the capital gains tax. This aspect of your Medicaid trust can save your heirs from paying capital gains tax at the immediate sale of the home.
The property you include in your Medicaid trust will be able to avoid the probate process after your death. This saves your family unnecessary time and cost and eliminates the risk of Medicaid estate recovery. Estate recovery is the way that Medicaid can be reimbursed for the amount paid for nursing home care. If you have more questions about Medicaid estate recovery, speak to one of our Overland Park Medicaid lawyers.
Creating a Medicaid trust as part of your Medicaid planning
The rules regarding Medicaid, its eligibility requirements and its recovery methods can be complicated and apply differently to each individual, depending on the unique nature of that person’s estate. For that reason, it is very important that you consult with one of our Overland Park Medicaid lawyers with every aspect of your Medicaid planning. Once you determine whether a Medicaid trust is right for you and should be included in your Medicaid planning, let our lawyers help you draft the proper Medicaid trust in order to protect your assets and your eligibility.
Download our free estate planning worksheet today! If you have questions regarding Medicaid trusts or any other Medicaid planning matters, please contact the experienced attorneys at Gaughan & Connealy for a consultation. You can contact us either online or by calling us at (913) 262-2000. We are here to help!