FAQs: Medicaid Income Question & Answer

What is a Medicaid Irrevocable Trust?

A Medicaid Irrevocable Trust is a contract which if precisely followed over time protects assets for Medicaid purposes.

What is the Difference Between a Revocable Trust and an Irrevocable Trust?

A Revocable Trust may be changed at any time and the individuals who set it up have total control of their assets. An Irrevocable Trust can’t be changed and the people who set it up don’t have total unlimited control over the assets. While a Revocable Trust may sound like a better way to handle things than an Irrevocable Trust, the Irrevocable Medicaid the Trust gives us the opportunity to qualify for benefits while the Revocable Trust doesn’t.

How Does the Medicaid Irrevocable Trust Protect Assets so That You May Qualify Over Time for Medicaid Benefits?

When you place assets in the Irrevocable Trust you give up your right to control them. When you give up your right to control your money and your real estate, you limit your ownership. Because you no longer may access your principal, it is no longer countable as yours when you’re applying for benefits. Depending on the amount of assets you have placed into the Irrevocable Trust and the amount of time that has passed determines when you will qualify for benefits. It is imperative that all records and receipts are kept!

How Do I Know How Much Money to Put Into My Medicaid Irrevocable Trust?

This is a delicate balance which your attorney will assist you with. Typically, a portion of money is left out that may be used to cover the time where you are not eligible for Medicaid benefits. Typically, this is 5 years.

When I Create the Medicaid Irrevocable Trust Will I Qualify for Medicaid Immediately?

No. Qualification for Medicaid depends on many factors, including the amount of money you put in the trust, the money outside the trust and how long the money has been in the trust. There is a Five- Year Penalty Period for assets transferred to the trust. When you apply for Medicaid you need to disclose to the government the assets you’ve put in the trust for the last five years. Often one of the goals is to get past the five-year period where the government looks back before applying for benefits. If you need to apply before the five-year period has expired, a penalty period may be calculated at the time the Medicaid application is submitted. During that time, you are not eligible for benefits. Because each transfer of assets into the trust causes a penalty period, we recommend not adding money to the Trust without consulting your attorney because often it causes an adverse penalty period and messes up the original planning.