Estate planning often encompasses far more than simply developing a roadmap for the distribution of estate assets after death. For example, many people (wisely) choose to include a Medicaid planning component in their overall estate plan in anticipation of the need to qualify for Medicaid during their retirement years. One common tool used in a Medicaid plan is a Medicaid trust. To know whether a Medicaid trust is right for your plan you first need to know the advantages and disadvantages to a Medicaid trust.
The need for Medicaid planning stems from the likelihood that you will need to qualify for Medicaid benefits at a later point in time. Qualifying for Medicaid is often the only way to cover the high cost of long-term care given the fact that neither Medicare nor most private health insurance policies will pay for long-term care. While Medicaid does cover long-term care costs, you must first qualify for participation in the program. Eligibility for Medicaid is based, in part, on your income and countable resources, with the program limits for both being very low. If the value of your countable resources exceeds the program limit (usually $2,000 for an individual applicant) you will need to “spend-down” those assets before Medicaid will help. Creating a Medicaid trust early on in life is one way to protect your assets while setting yourself up to qualify for Medicaid later on in life.
A Medicaid trust is a specialized irrevocable living trust. The advantage to a Medicaid trust is that because the trust is irrevocable, assets transferred into the trust are no longer considered part of your estate and, therefore, will not be considered as “countable resources” for Medicaid eligibility purposes. The major disadvantage, however, is that also because the trust is an irrevocable trust you will not be able to make changes to, or revoke, the trust once is has been established. Also, you must give up control of the assets placed in the trust. This means that if you never need Medicaid benefits, for example, you cannot simply take back the assets that were transferred into the trust. For this reason, care must be taken when creating the terms of the trust to ensure that the trust assets are used in a way you wish them to be used. Always consult with your Illinois estate planning attorney before attempting to create a Medicaid trust.
If you have additional questions or concerns about Medicaid planning, or your Illinois estate plan in general, contact the experienced Illinois estate planning attorneys at Nash, Nash, Bean & Ford, LLP by calling 309-944-2188 to schedule your appointment today.
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