Does Putting Your Home In A Trust Protect It From Medicaid?

Does Putting Your Home In A Trust Protect It From Medicaid - Can Medicaid Take Your House If It Is In A Trust - How Much Does A Medicaid Asset Protection Trust Cost

In this article, you’ll learn about: 

  • if putting your house in a trust protects it from Medicaid
  • if Medicaid can take your house if it’s in a trust
  • irrevocable vs revocable trusts for Medicaid protection
  • what happens to assets if you go into a nursing home
  • how far back can a nursing home take your house
  • can a nursing home take your home if it’s in a trust
  • how to avoid nursing homes taking your house

Let’s dig in. 

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Does Putting Your Home In A Trust Protect It From Medicaid?

Yes, placing your home in an irrevocable trust can protect it from Medicaid. 

When done correctly, the home becomes the property of the trust and not the individual. 

As a result, Medicaid can’t count it as an asset after they consider a specified “look-back” period. 

This approach is beneficial because it can help individuals qualify for Medicaid without the need to sell their homes.

However, there are also important considerations to be aware of. 

Once the home is transferred to the trust, the original owner might lose some control over the property. 

If the transfer to the trust or its setup isn’t done properly, there’s a risk of facing penalties. 

Furthermore, the specific rules governing trusts and Medicaid policies can vary from one state to another.

So it’s crucial to understand the local regulations and implications before transferring a property to a trust.

Read More: What Happens To Assets If You Go Into A Nursing Home?

Can Medicaid Take Your House If It Is In A Trust?

Putting your home in a trust can protect it from Medicaid, but it depends on the type of trust.

An irrevocable trust can shield your home’s value from Medicaid, potentially helping you qualify for Medicaid benefits.

In an irrevocable trust, the grantor (the person who creates the trust) gives up control over the assets placed into the trust

Once the assets are transferred to the trust, the grantor cannot change, modify, or revoke the trust without the consent of the beneficiaries and/or the trustee (the person or entity responsible for managing the trust). 

The trustee is responsible for managing the trust according to its terms and distributing the assets to the beneficiaries as outlined in the trust agreement.

However, transferring your home to the trust must happen at least five years before applying for Medicaid, or else it may not be effective.

A revocable trust, on the other hand, does not protect your home from Medicaid since you retain control over the assets in the trust.

In a revocable trust, the grantor (the person who creates the trust) retains full control over the trust and its assets.

As the grantor, you have the authority to amend, modify, or revoke the trust at any time during your lifetime without needing the consent of the beneficiaries or the trustee.

You can also manage the assets in the trust and change the beneficiaries or the terms of the trust as you see fit.

The control only shifts to the trustee and beneficiaries upon your death or if you become incapacitated, as specified in the terms of the trust agreement.

Read More: What Happens When Medicare Stops Paying For Nursing Home Care?

Difference Between Irrevocable And Revocable Trusts For Medicaid

Revocable trusts can be changed or revoked by the grantor, while irrevocable trusts cannot be changed after creation.

For Medicaid, assets in a revocable trust are still considered countable, potentially affecting eligibility.

When assets are considered “countable” for Medicaid, it means they are included in the calculation of an individual’s total assets when determining their eligibility for Medicaid benefits. 

Medicaid is a government program that provides medical assistance to low-income individuals, and eligibility is often based on financial need.

Different Medicaid programs have specific asset limits that applicants must meet to qualify. 

Countable assets typically include:

  • cash
  • bank accounts
  • investments
  • real estate (other than the primary residence in certain situations)
  • other valuable properties

If an applicant’s total countable assets exceed the Medicaid program’s asset limit, they may be deemed ineligible for Medicaid benefits until they “spend down” or reduce their assets to meet the eligibility criteria

This is where irrevocable trusts can be useful, as assets transferred into such trusts may no longer be considered countable after a specific period, potentially making the individual eligible for Medicaid sooner. 

In contrast to a revocable trust, assets placed in an irrevocable trust are usually not counted for Medicaid eligibility after a certain period.

Irrevocable trusts may provide more protection for assets from Medicaid spend-down requirements.

Read More: What Happens To A House In A Trust After Death?

What Happens To Assets If You Go Into A Nursing Home?

When you go into a nursing home, your assets may be used to cover the costs of care. 

The nursing home will assess your finances to determine your eligibility for Medicaid. 

If your assets exceed the limit, you may need to pay for the care privately until you meet the Medicaid requirements. 

Certain assets, like your home, may be exempt from consideration, but it depends on your specific situation and the laws in your state.

Your home may not be exempted in certain situations, and the rules can vary depending on the state you live in. 

Here are some common reasons why a primary residence might not be exempted if you go into a nursing home::

  • Home Equity Limit: Some states impose a maximum value on the home’s equity that can be exempted. If your home’s equity exceeds this limit, it may not be fully exempted, and you may be required to use some of the equity to pay for nursing home care.
  • Intent to Return: If you permanently move out of your home and do not have any intention to return, it may not be considered your primary residence anymore and may not qualify for exemption.
  • Long-Term Care Insurance: If you have long-term care insurance that covers nursing home expenses, some states may not exempt your home, as you have an alternative means of paying for care.
  • Estate Recovery: In some states, after the Medicaid recipient passes away, the state may attempt to recover the costs of care from their estate, which includes the value of the home. This is known as “estate recovery.”
  • Transfer of Assets: If you transfer ownership of your home to someone else within a certain period before applying for Medicaid, it could result in a penalty or disqualification, making your home ineligible for the exemption.
  • Trust Ownership: Placing your home in certain types of trusts can impact its exempt status. In some cases, the home may still be considered an available asset for Medicaid eligibility.
  • Spouse’s Situation: If you are married and your spouse continues to live in the home while you receive nursing home care, the home is typically exempt. However, upon the death of the Medicaid recipient, the state may seek estate recovery from the spouse’s estate.

Read More: How To Protect Parents’ Assets From Nursing Homes

How Far Back Can Nursing Home Take Your House?

In general, nursing homes can take your house if you can’t afford care. 

Medicaid rules allow a “look-back” period of up to 5 years to check for asset transfers. 

If you transferred your house during that time, it might affect Medicaid eligibility. 

If you can’t pay for care, Medicaid could put a lien on your home.

Read More: What Are The Disadvantages Of Putting Your House In A Trust?

Can A Nursing Home Take Your House If It Is In A Trust?

If your house is in a trust, a nursing home cannot take it to cover your nursing care costs. 

Trusts can offer protection from such situations. 

In general, if your house is in either a revocable or irrevocable trust, it may provide protection from nursing home costs. 

If a nursing home can take your house even though it’s in a trust, it’s likely due to certain exceptions or circumstances that may exist. 

Some common reasons include:

  • Medicaid Look-Back Period: If you transfer your house into a trust within a certain period before applying for Medicaid, the transfer may be considered a fraudulent attempt to qualify for benefits, and the house could still be counted as an asset for Medicaid eligibility purposes.
  • Unfunded Trust: If the trust is not properly funded, i.e., the ownership of the house was not transferred to the trust, then the nursing home might be able to go after the house to cover your care costs.
  • Trust Terms: Some trusts have specific provisions that allow assets, including the house, to be used for certain purposes, such as paying for medical expenses or long-term care.
  • Personal Guarantees: If you, as the trust creator or trustee, have provided personal guarantees for nursing home costs or other debts, the house might be used to fulfill those obligations.
  • Fraudulent Conveyance: If the transfer of the house into the trust is deemed fraudulent or done to evade creditors, the nursing home might challenge the transfer.
  • Government Claims: In some cases, the government may have the right to recover costs from your estate, including assets in a trust, if they provided certain benefits or services.

Read More: Tax Implications Of Transferring Property Into A Trust

How To Avoid Nursing Homes Taking Your House

To avoid nursing homes taking your house:

  • Plan ahead by setting up a trust to protect your home.
  • Transfer ownership of your house to the trust.
  • Do this at least five years before needing nursing home care.
  • Keep paying property taxes and maintaining the home after the transfer.

If you can’t plan ahead, consider Medicaid-compliant annuities.

Read More: What Assets Cannot Be Placed In A Trust?

Medicaid Look Back Period

The Medicaid Look Back Period is a time frame when Medicaid checks your financial transactions. 

It’s 5 years before applying for Medicaid. 

The goal is to find any gifts or transfers of assets. 

Medicaid wants to ensure people didn’t give away assets to qualify. 

If they find such transfers, a penalty period might be imposed. 

During this period, you can’t get Medicaid benefits. 

It’s important to plan finances carefully to avoid issues during the Look Back Period.

Read More: How Can I Pay For Assisted Living With No Money?

How Much Does A Medicaid Asset Protection Trust Cost?

A Medicaid Asset Protection Trust’s cost varies. 

Initial setup can be $1,000 to $3,000. 

Attorney fees depend on the complexity of your situation and the estate. 

There are also ongoing fees for management. 

Costs can ensure asset protection for Medicaid eligibility. 

It’s important to get exact pricing from an estate planning attorney.

FAQs About Putting Your Home In A Trust To Protect It From Medicaid

Here are other questions clients ask us about protecting their homes from Medicaid. 

Does An Irrevocable Trust Protect Assets From Medicaid?

Yes, an irrevocable trust can protect assets from Medicaid. 

When assets are transferred into an irrevocable trust, they are no longer considered personal assets of the original owner. 

Therefore, they typically aren’t counted when determining Medicaid eligibility. 

However, there’s a five-year look-back period.

If assets are transferred to the trust within five years before applying for Medicaid, there can be penalties or delays in eligibility. 

Planning ahead is crucial to avoid these penalties.

Read More: Does Your House Have To Be Paid Off To Put It In A Trust

Can Medicaid Take A Jointly Owned Home?

Yes, Medicaid can pursue estate recovery on a jointly owned home after a recipient’s death. 

The home may be at risk depending on state rules. 

Some states may not pursue the home if a co-owner still lives there, while others might place a lien on the deceased’s share of the property. 

The exact approach depends on your state’s regulations.

Read More: How To Put House In Trust With Mortgage

Get A Medicaid Protection Trust

If you need a Medicaid asset protection trust, fill out the form below. 

We have the experience to make sure that:

  • you don’t get hit with penalties or paybacks
  • your assets are protected from nursing homes
  • you maintain Medicaid eligibility but can still pass assets to your heirs
  • you have supplemental income
  • your taxes are minimized
  • you are protected from Medicaid estate recovery

Talk soon. 

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