Asset Protection Trusts
What is an Asset Protection Trust?
While trusts and the assets within a trust are usually considered countable for Medicaid purposes, some trusts are actually considered a gift or divestment. These trusts are irrevocable, and the person who established the trust does not have access to the assets within the trust. A special type of irrevocable trust known as an Asset Protection Trust can be used in Medicaid planning.
However, unlike a lot of the planning solutions discussed on Senior Care Counsel, Asset Protection Trusts are used as a form of proactive planning for Medicaid. These trusts should be used at least five years in advance of needing Medicaid benefits in order to surpass Medicaid's lookback period.
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How Does an Asset Protection Trust Work?
When using an Asset Protection Trust, the individual and, if applicable, their spouse, change ownership of the majority of their assets to the trust. This will be considered a gift or divestment during the five-year lookback period. After this five-year period passes, the individual can apply and qualify for Medicaid. Since the asset in the trust are not owned by the individual and the trust is irrevocable, they are not considered countable assets for Medicaid purposes.
Asset Protection Trusts must be set up correctly in order to be effective. It's important to work with a qualified elder law attorney familiar with these trusts and Medicaid planning.
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An Introduction to Medicaid
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