A Medicaid Asset Protection Trust, often called a “five-year trust,” is a planning tool that can help set aside savings for your family now so they are not consumed by nursing home or long-term care costs later. For families who plan ahead, it can mean the difference between preserving a lifetime of savings and spending nearly all of it on care.
Why families consider one
Long-term care is expensive. Nursing home care can cost more than $10,000 a month, and Medicaid, which pays for much of that care, allows applicants to keep very little in savings. Without planning, many families find that most of what their parents worked for goes to care costs before Medicaid will help.
How it works, in general
You place certain assets into an irrevocable trust managed by a trustee you choose, often an adult child. When the trust is properly structured and enough time has passed before you need care, those assets may be protected for your family. Medicaid reviews your financial history for the five years before you apply, which is where the “five-year trust” name comes from.
Who is a good candidate?
A Medicaid asset protection trust generally fits people who:
- are in reasonably good health and planning ahead, not facing an immediate need for care;
- have savings, investments, or property they want to preserve for their children; and
- have enough other income and assets to live on comfortably.
The trade-offs
This kind of trust is irrevocable. It involves giving up some control over the assets you place in it, so choosing the right trustee, and deciding which assets belong in the trust, are important decisions. It is not a tool for a crisis that is already underway.
Specific legal requirements, and why they matter
Medicaid asset protection trusts have highly specific legal requirements and significant legal, tax, and Medicaid implications. A trust that is drafted or funded incorrectly may fail to protect anything, may cause tax problems, or may even delay eligibility. The interaction with your home, your income, and your other estate planning must be considered carefully.
Our attorneys are experienced at drafting Medicaid asset protection trusts to the correct legal specifications and designing each one to fit your needs, your assets, and your family’s goals.
Already facing a need for care?
If care is needed now, a five-year trust will not solve the immediate problem, but there are often other legitimate options. Tools such as personal caregiver agreements and Qualified Income Trusts may help, and families can often protect more than they expect. Contact us as early as possible.
Contact us today for a consultation
Jackson+Jackson helps families plan for long-term care. Call us to schedule a consultation at any of our offices in New Orleans, Birmingham, Mobile, or Pensacola.
This article provides general information only. It is not legal advice, and reading it does not create an attorney-client relationship. Every situation is different; please consult an attorney about yours.