Eligibility for Medicaid is based on means. In other words, the program does not extend benefits to applicants who have more than a certain amount in assets. This system works reasonably well for people of modest means who qualify for the program, and wealthier people may not need help from Medicaid when they get older, as they may be eligible for other programs, or able to afford their medical expenses.
However, many Texans are stuck in the middle. They may not have enough assets to pay all their medical needs while continuing to live comfortably well into old age, but they have too many assets to qualify for Medicaid. Fortunately, there is a type of trust that can help these people.
A Medicaid-qualifying trust is designed to allow people to preserve their assets while maintaining their eligibility for Medicaid.
A trust is a tool of elder law and estate planning that can also be used during a person’s lifetime. Here’s how it works: An owner of assets places the assets in trust, names a professional or trusted friend as trustee, and names people or charities as the beneficiaries. The trustee then manages the assets for the benefit of the beneficiaries. In many such arrangements, the trust document directs the trustee to invest the assets while making regular payments to the beneficiaries.
In so-called living trusts, the owners place the assets in trust and name themselves as beneficiaries. This can have advantages for tax purposes, estate planning and other concerns.
For the purposes of Medicaid, the advantage of a trust is that it allows a person to maintain their eligibility for the program while also keeping access to assets that might otherwise make them ineligible.
Medicaid trusts can be lifesavers l whether you are setting one up for yourself or for a vulnerable adult in your life, but they take careful planning. An experienced estate planning attorney can help people understand how trusts can help them and their families.