Can Trusts Help Medicaid Qualification?

Nov 1, 2015

The short answer is YES! One of the ways that you can protect a loved one’s assets and establish Medicaid eligibility is through a properly drafted trust. This type of trust can minimize the deterioration of an estate by safeguarding assets for loved ones and establish Medicaid eligibility.

Certain trusts allow individuals with income over the Medicaid income cap to establish eligibility for benefits that pay for long-term care needs. With the creation of certain trusts, the Medicaid applicant must relinquish control of his or her assets but can still determine restrictions for beneficiaries. Other trusts allow family members to leave assets to a loved one who is on Medicaid, or may receive Medicaid benefits at a later date that will not be counted as an asset for Medicaid programs.

Medicaid Exempt Trusts

Here are three Medicaid exempt trusts that can help maintain eligibility without losing control of assets.

Miller Trusts 

Miller Trusts, also known as qualified income trusts, can be used to help qualify for Medicaid by allowing Medicaid applicants to redirect some or all of their income into a trust if their monthly income exceeds the eligibility limit for Medicaid assistance. This income can come from monthly wages, pension plans, Social Security, or other sources of income.

The trust will mandate how that deposited income can be spent monthly and can include allowances for the applicant and his or her spouse, Medicare premiums and nursing home costs for the applicant.

The ‘payback’ provision for a Miller Trust mandates that after the death of the applicant, the state can recover expenses Medicaid covered while the applicant was alive from the remaining funds in the trust. Only after the state recovers the expenses can other beneficiaries in the trust be reimbursed with the remaining funds.

First- Party Special Needs Trusts 

Special needs trusts can be used to transfer the assets of a special needs applicant if they are at risk of being ineligible for Medicaid for having too many assets. These trusts can also be used to help provide supplemental amenities to an applicant, which is why these trusts are also called supplemental needs trusts.

This trust must be created by the applicant’s parent or guardian, or by the court for the sole benefit of the disabled applicant, meaning that if any other beneficiaries are listed in the trust the applicant could face transfer penalties. The applicant must be under the age of 65 (or risk losing Medicaid eligibility) and legally disabled according to the Social Security Administration.

The special needs trust must be created using applicant assets like outright inheritances, direct gifts, and court settlements, however new income cannot be transferred into the trust until the following month after it is received. Expenditures from a special needs trust may require approval from the state but funds from the trust may cover healthcare expenses and personal expenses depending on the level of care needed by the individual.

The same ‘payback’ provision exists for special needs trust as Miller Trusts. The state must be reimbursed for expenses covered for during the disabled individual’s lifetime.

Non-Profit Pooled Special Needs Trusts

Another option for excess income with a lower cost of administration is transferring assets into pooled trusts. Pooled trusts are created when a non-profit organization gathers together the resources and assets of many Medicaid applicants using a ‘master trust’ for management purposes and create sub-accounts for each individual applicant to use.

Read ‘3 Types of Special Needs Trusts You Need To Know About’

Disabled applicants can create a sub-account within a pooled trust if they are legally competent, unlike a special needs trust. A parent, guardian or court system can also create a sub-account for the individual. Each sub-account can be used only for the benefit of the individual (who must be disabled according to the Social Security Administration).

Income and assets can be used to fund the pooled trust, and the beneficiary can use the funds from the trust to cover items like medical expenses, health insurance, living expenses, some personal expenditures, and a family or spouse allowance. It’s best to speak with an elder law attorney to discuss what expenditures are permissible with a pooled trust.

The ‘payback’ provision also applies for pooled special needs trusts if funded with the Medicaid beneficiary’s assets after the death of the Medicaid beneficiary, however the remaining funds are divided between the non-profit organization and other beneficiaries.

How to Get Started

Transferring assets while maintaining Medicaid eligibility can become complex very quickly. Only an attorney experienced with Medicaid and Miller Trusts can give you the best guidance you need to plan for long-term care successfully.

Contact the Law Offices of Christina Lesher, PC at (713) 529-5900 for expert Medicaid planning. Our attorneys will help you determine the best option for your loved to protect their assets and meet Medicaid’s requirements.

Using a multidisciplinary disciplined team we find the right resources and right path for your loved ones in the areas below