It’s natural to want to leave your hard-earned money and property to your loved ones after you’re gone. Unfortunately, simply willing your home to your children or spouse can have negative consequences in the coming years.
In the event that you or your spouse needs Medicaid, the government may be able to use your willed assets to pay for your care. If you want to hold on to your property, while ensuring you and your spouse have access to healthcare in the years to come, a trust may be the solution.
Along with preserving Medicaid eligibility, a legal trust can allow you to transfer your home to children or other beneficiaries, so you can remain in it as you age.
Understanding Medicaid Eligibility
Contrary to popular assumption, Medicare typically does not pay for expenses associated with long-term care. If you or your spouse requires care you can’t pay for with personal assets or private insurance, you may have to turn to government benefits such as Medicaid.
Medicaid is governed by federal guidelines but administered by the state in which you live. The Arizona Health Care Cost Containment System (AHCCCS) provides long-term care benefits to qualifying residents. Requirements vary based on whether you’re the person in an institution receiving care or the spouse of the person in need of support.
As the Institutionalized Individual, you must have an income below the county-specific Divestment Penalty Divisor and less than $2,000 in countable assets. As the Community Spouse, on the other hand, you don’t have an income limit.
However, you have a maximum Community Spouse Resource Allowance (CSRA) of $126,420. Note that transferring either party’s resources to anyone who isn’t a spouse can leave a current Medicaid recipient ineligible for care for a period of time.
Those who hope to qualify for Medicaid in the future may be tempted to give away their property or possessions now. Unfortunately, circumstances can occur which result in a child or other relative losing these belongings. If you want to stay in your home and remain eligible for Medicaid, you should consider whether an irrevocable trust is the answer.
Trusts give one person (a trustee) the legal title to property for another person’s benefit. As the trustee, you are required to abide by the rules outlined in the trust instrument. Putting your home in an asset protection trust is one of the best ways to avoid issues with Medicaid.
Under these circumstances, your home belongs to the trust, and you are no longer the legal owner. In some cases, the state can count trust assets against Medicaid’s resource limits. For this reason, it’s important to entrust the formation of your trust to a knowledgeable attorney.
The law differentiates between revocable and irrevocable trusts. With a revocable trust, the original owner of the property has the right to make changes or even rescind the transfer. For this reason, the state considers the funds in a revocable trust to be assets that affect Medicaid eligibility.
On the other hand, an irrevocable trust may not be altered once it’s been created. Medicaid does not count the principal of this trust, provided that the trustee can’t use it to pay the person who established the trust or that person’s spouse.
Additionally, an irrevocable trust may allow you to stay in your home. When you put your house into a trust, you cease to be the legal owner. As a result, the home may not be subject to a Medicaid lien.
However, you can make it a condition of the trust that you have legal right to remain in the home for the rest of your life. That way, you don’t have to worry about being forced to sell your home to get the healthcare you need. This type of trust can also protect your spouse from having to leave home in the event that you have to go into a care facility or nursing home for an extended period.
How to Create a Trust
An asset protection trust can be the answer to your Medicaid woes. Still, it’s important to ensure the trust is created properly. If you want to create a trust in Arizona, the first step is writing a trust document that details the specific rules and requirements trustees must follow. Decide which assets to put in the trust and which ones to keep or transfer to friends and loved ones.
Additionally, you will need to select both trustees and beneficiaries, or those who will receive the assets when you’re gone. Once the trust has been completed to your satisfaction, you will need to sign it in the presence of a notary.
Services exist that allow individuals to create a living trust online. However, if you want to protect both your assets and your medical future, it’s best to create a trust with the help of an experienced attorney. Whenever possible, you should plan ahead when making decisions about your future.
Because Medicaid laws come with a “lookback” period of five years, it’s best to avoid transferring assets during the 60 months before you apply for support. Otherwise, you may be ineligible for Medicaid for a period of time determined by the value of assets you gave away.
Getting Help With Medicaid Planning
Medicaid planning is complex, and can be overwhelming to handle on your own. Fortunately, the team at JacksonWhite Law is here to help.
Contact the JacksonWhite Elder Law team today at (480)467-4337 and learn how we can help to ensure you receive the maximum ALTCS benefits available, while preserving as many of your assets as possible.
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