Our Long Beach Medicaid attorneys recommend Medicaid planning as a part of a comprehensive estate plan. Another recommendation is to include a Medicaid trust as part of your overall plan. When making these decisions clients typically have many questions. One of those questions is: what happens to the Medicaid trust if you never actually need it? Our experienced Long Beach Medicaid attorneys can answer these and other questions about Medicaid trusts and Medicaid planning.
How is Medicaid planning beneficial?
Medi-Cal (California’s Medicaid program) provides benefits that are meant to help low-income individuals pay for medical services. Because Medi-Cal is a needs-based benefits program, to be eligible you must have no more than $2,000 in assets. Even though certain assets, like your home, are excluded, it is still very easy to deplete your savings before Medi-Cal will begin covering your long-term care expenses. However, the goal of Medicaid planning is to keep you from exhausting all of your resources, while still being eligible for benefits. Our Long Beach Medicaid attorneys can help you reach this goal.
Medicaid planning also helps to avoid fraud
Contrary to what some people think, you are not allowed to transfer your assets to someone else, in order to reduce your assets and qualify for Medi-Cal. Medi-Cal is a “payer of last resort,” which means Medi-Cal will not start paying for long-term care until all other payment sources have been exhausted. Therefore, if an applicant for Medi-Cal gives away property or assets just before applying, those property transfers may result in your benefits being delayed or denied. But, with careful Medicaid planning, you can still maintain control of your assets while qualifying for Medi-Cal benefits, when necessary.
Health insurance might not cover the costs of long-term care
Regrettably, many people underestimate the real cost of long-term care. Long-term care is often very expensive. The average annual cost of long-term care in California is more than $94,000. Then consider that almost half of people 65 and older need long-term care of close to five years. Then consider the fact that many of those people have already been struggling with the cost of care in their own homes before they seek a long-term care facility. It is a misconception that Medicare and private health insurance is sufficient to cover the costs of long-term care. The reality is, they typically cover very little of the costs.
What is the purpose of a Medicaid Trust
A Medicaid Trust allows you to protect your assets from Medicaid spend-down, to retain a limited income from the trust, and to leave any remaining funds to your beneficiaries. More importantly, a Medicaid trust allows you to remain eligible for Medicaid long-term care benefits. That way, you can have some money left over for your heirs, even after the high expense of long-term care. The way it works is, once you transfer your assets to the trust, and the applicable waiting period has passed, those assets will not be continued in determining your eligibility for Medicaid.
How Medicaid trusts work
The reason that a Medicaid trust works is because it is irrevocable. An irrevocable trust cannot be altered or amended. Medicaid laws require that such a trust be irrevocable because, if you can receive from the trust any portion of the principal, then the entire value of the trust becomes a countable asset for Medicaid eligibility purposes. If a Medicaid trust is not irrevocable, then for the purposes of Medicaid, you would still be allowed to return the trust assets to yourself after you begin receiving benefits. What this also means is that if you never need Medi-Cal benefits, what happens to the assets used to fund your Medicaid trust will depend on the terms you included in that trust when you created it.
It is possible to maintain some control
Although you cannot revoke an irrevocable Medicaid Trust, there are some ways to maintain some control over your assets, especially if you find that you don’t really need the trust. There are cases where people create Medicaid Trusts, but then they never have the need to apply for long-term Medicaid benefits. In those cases, there are some changes that you can make that will allow you to regain control of your assets. If you retain the right to change the trustee of the Medicaid Trust, then you can have some control.
Disadvantages of a Medicaid Trust
A Medicaid trust offers the same asset protection as any other type of irrevocable trust. However, it has a few disadvantages that other irrevocable trusts do not. With a Medicaid trust, the grantor is prohibited from using the trust assets for other health care purposes. The limits on income are also a disadvantage.
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