In this Elder Law Minute, Wes Coulson explains what the government looks at when determining your eligibility for Medicaid.
Video Transcript:
I want to talk to you today about trusts and Medicaid, and I want mainly to draw the distinction between typical living trusts and the type of trust that we use in our planning that we call them asset preservation trust and real estate preservation trust. The main question here is whether assets that you place into a trust are going to be treated as yours in determining your eligibility for Medicaid. By the way, the same thing is true of VA benefits.
In answering that question, the government is looking at three things, and so let me give those to you in plain English, then I’ll translate into legalese. The first thing they’re asking is, is this thing a done deal? Do you have any right a couple of years down the road to say, you know what, I changed my mind, just cancel it and I’ll take everything back? Well, the government says that if you have that right, then you need to exercise it, take everything back, and the money in the trust, other assets, are still yours. So, in legal terms, for a trust assets not to count as yours, the trust needs to be irrevocable. Yes, you have the five-year look back to deal with, but the first rule is it has to be irrevocable.
The second thing that the government’s looking at is if you think of this trust as a safe, and that’s a great analogy because when you put things in a safe, you haven’t lost them. They haven’t gone anywhere, they’re still there. They’re just there in a way the bad guys can’t get to them. So, the government’s going to ask, well, who has the key to the safe? If you have the key to the safe, then they’re going to say, ‘Well, that’s easy. Take the key, open the safe, take everything out, spend it until you’re broke, and come back.’
So, if we think of the trust as the safe, somebody other than you has to have the key to the safe. In trust terms, the person with the key to the safe is the trustee. So, with a living trust, you’re going to be your own trustee. With the type of trust that protects assets, somebody else needs to be the trustee. But the good news here is you get to pick who that is. So, it’s probably one or more of your adult children or other close relatives, basically whoever you trust most to handle money.
The third thing that the government is looking at is whether you can get money out of that trust. And they look at that both in terms of whether you can demand money out or even whether the trustee can distribute money directly out to you. If the answer is yes, and that’s true of a living trust, then the assets of the trust still count as yours. If the answer is no, then they don’t.
Now, people hear that and they say, ‘Well, I’m not interested because what if I need some of the money in that trust? If I can’t get it back out, I don’t like the idea.’ Well, as it turns out, I can give you a simple baseball analogy that will make it all better. You can’t get money straight out of a trust, and a runner on second base in baseball can’t run straight across the infield to get to home plate. Doesn’t mean that they can’t get there, it just means going second to third, third to home.
So, here, the trust is second base, family members third base, and your home plate. So, as long as the money that you need, the runner goes from second to third, which is fine because those family members are beneficiaries, and then from third to home, which is fine because there’s no law against family members helping out, their mother or father, whoever it is, it works that way.
You should know about these things because trusts are probably our single most powerful tool in helping people protect assets from Medicaid spend-down. Literally, your life savings are at risk, and this is the best way to protect them. Hope that helps. I hope you realize that we are the people to help you with this.
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Dent-Coulson Elder Law is dedicated to providing families in the St. Louis area with their Elder Law needs. Our practice areas include Asset Preservation Planning, Veterans Benefits, Medicaid Eligibility, Alzheimer’s Planning, Special Needs Planning, Estate Planning and more. We understand the financial challenges you may face as you and your loved ones grow older. At Dent-Coulson Elder Law, our clients’ well-being is our number one priority. For immediate help, call (618) 632-7000 (IL) or (314) 567-9292 (MO), or Contact Us and we will get in touch as soon as possible.
