Matthew S. Payne is a Chicago-based attorney with a 20-year record of success in civil litigation, real estate law and estate planning.

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Asset protection trusts for Medicaid planning

On Behalf of | Aug 16, 2021 | Estate Planning

Many seniors may be concerned that they will need long-term nursing care in the future. However, the costs of this type of skilled nursing care may be out of reach for large numbers of people, even if they have saved a some funds that they would like to pass on to their family members. The cost of annual treatment at an Illinois assisted living facility may regularly reach up to $150,000 each year. Medicare does not cover nursing home expenses except for a short-term rehab. Medicaid, the government health program funded by both the states and the federal government, provides necessary coverage for long-term nursing care or assisted living.

Medicaid qualification can be a challenge

However, it can be a challenge for many seniors to qualify for Medicaid. Eligibility is based on countable assets, and seniors must generally have less than around $2,000 in order to confirm their access to Medicaid. While countable assets exclude a primary residence and one car, they include retirement funds, investments and bank accounts. As a result, many seniors may need to entirely exhaust their savings in order to receive the assistance they need for long-term nursing care.

Trusts and Medicaid planning

An asset protection trust for Medicaid planning is one option seniors can use to prepare for Medicaid eligibility without giving up their hopes of leaving some inheritance for their loved ones. This kind of trust should generally be planned in advance, as there is a five-year “look-back” period when seniors apply for Medicaid in which assets are considered part of the senior’s estate.

An irrevocable trust permanently transfers control of the assets placed in the trust to a trustee. This can provide a safer option than simply giving the funds away, because trusts can provide tax advantages and a legal structure for the management of the assets.