Medicaid Planning for Mom and Dad

The Elephant in the Room Part 2 of 2

Written by Attorney Richard Bush

 We have previously discussed how all parents worry about how to best provide for their children after they are gone.  No one worries more than parents of children with disabilities.  We have noted that while there are ways to find information about Special Needs Trusts, there isn’t much information out there addressing the needs of the parents or siblings who are the caregivers for the disabled individual.

So, what’s a parent to do? We find that it is not at all uncommon to have both a Special Needs Trust for the disabled child and an Asset Protection Trust for mom and dad; this strategy remains as a viable way to allow for assets to remain with the family and not be consumed by medical and nursing care expenses. 

An Asset Protection Trust can be one of the most valuable planning vehicles for mom and dad.  This type of trust can be a strategy to meet Medicaid’s asset limit when an applicant (like mom or dad) has assets that exceed the Medicaid limits. These Trusts are sometimes referred to as Medicaid Planning Trusts, Medicaid Trusts, or less formally, Home Protection Trusts.

These trusts protect an individual’s assets from being counted for eligibility purposes when applying for Medicaid, and enables a person who would otherwise be ineligible for Medicaid to become Medicaid eligible and receive the care they require be at home or in a nursing home.  Assets in this type of trust are no longer considered owned by the Medicaid applicant. These trusts also protect assets for non-disabled children and other relatives, which is a win-win for parents and their families.

Asset Protection Trusts should be created with a goal of meeting the 60 month (5year) “look back” period; the idea is that Medicaid will not be needed for a minimum of 5 years in most states.  During the look back period, the transfer of assets to an asset protection trust is seen as a gift, therefore, the trust should be fully funded as early as possible. We encourage families to work with a reliable financial planner to assist in determining which assets to place into the trust and which assets might remain “at risk”.

There are many different types of trusts and not all of them are Medicaid compliant. For instance, family trusts, or revocable living trusts, are different from Asset Protection Trusts because the language of the trust allows the trust to be cancelled or altered, or allows for money in the trust to be used for the Medicaid applicant’s long-term care costs.  Also, it easy to confuse Asset Protection Trusts and QITs (Qualified Income Trusts).  QITs simply address eligibility with no savings of assets for family members, while Asset Protection Trusts protect one’s assets for the future, and allow families to pass the assets on to children and others even after mom or dad requires nursing home care., 

            Another item to be aware of is sticker shock; these trusts are as expensive and often more expensive that a Special Needs or other types of Trusts.   The reason for this is the expertise needed to meet the Medicaid rules and regulations.

We encourage questions! If you have questions or need any additional information, please do not hesitate to call or email us at your earliest convenience!

BIO:  Richard Bush is a past Board member and President of the Council on Developmental Disabilities and a board member of the Down Syndrome of Louisville Education Foundation and a. He is also the father of a child with Down syndrome (Mike) and as a parent, he is versed on the needs of parents and individuals with disabilities. For more information, contact Richard Bush at 2950 Breckenridge Lane, Suite Nine, Louisville, KY 40220; 502-584-7255; email; Bushmark4@aol.com