The Role of Trusts in Missouri Medicaid Planning

What is a Trust?

A trust is an agreement that stipulates how one wishes to distribute their assets throughout the rest of their life and in death.

The three main characters in a trust are:

• The grantor or trust maker, the person who creates the trust
• The trustee, the person appointed to manage the trust according to the grantor’s wishes
• The beneficiary is the person or persons (or entity) who will receive the income or assets from the trust.

Types of Trusts

A revocable living trust is a standard option that people use to provide them with control over the assets within and the ability to make changes when necessary.

An irrevocable trust is an option to help protect assets from taxes and provide other benefits. The drawback to this type of trust is once it’s in place, it can not be changed or revoked, meaning you lose some control over those assets.

A special needs trust is another option that is an excellent choice when necessary. The assets within the trust are protected from income requirements that may need to be met for your special needs loved one to remain eligible for state or federal benefits.

An Irrevocable Medicaid asset protection trust is an effective tool used to provide protection for Medicaid eligibility by removing the assets in the trust from your income calculations. Though there are other methods to help ensure you are eligible for Medicaid, such as spending down your assets, placing them in a trust enables you to keep them for your loved ones but remove them to increase eligibility for Medicaid.

Main Advantages of a Trust

By placing assets into a trust, those assets can typically avoid the probate process upon death. The probate process can become timely and costly for your loved ones, leaving them without access to necessary funds until it is complete. By stipulating assets to be transferred through the trust, your loved ones will have quicker access to these funds.

Another appealing aspect is the privacy of the assets held within the trust. The probate process is public; therefore, all of your private financial information can be out in the open. Placing assets in a trust can generally remain confidential and not part of the public probate process.

Tax implications are another appealing aspect of creating a trust. In many cases, the assets within the trust are subject to less or no estate taxes when done effectively. This reduction in estate taxes can help to ensure your loved ones have more of your legacy left behind and less going to taxes. This benefit won’t apply to all families, depending on the size of their estate, but it is an appealing characteristic.

Finally, another critical reason to consider a trust is the ability to be eligible for Medicaid using an effective trust. You can place assets in a trust and remove them from your overall estate, thereby changing your eligibility probability for Medicaid without spending down other assets to meet the standard.

Medicaid Eligibility

One of the most significant expenses we may face in our lifetime is nursing home care. Medicaid allows us to have some reprieve from those costs, but strict eligibility requirements must be met to qualify.

An effective trust can help to ensure that you are better qualified for Medicaid when done properly. An irrevocable trust can contain assets you no longer have access to or can change in the future, excluding them from your overall Medicaid calculations. It’s important to note that a revocable trust in which you can make changes or retain control during your lifetime will not protect those assets from Medicaid eligibility requirements.

Why is Timing Important?

One of the strict requirements for Medicaid eligibility is the time that they can review what assets were sold or transferred within five years to still count against you, called a “look-back period.”

What this means is that if you had gifted or sold assets within five years of applying for Medicaid, those assets would count against you, even if you no longer own them.

With an effective trust that was created at least five years in advance, these assets can be protected and not count against the eligibility requirements.

If you are within five years of applying for Medicaid, there are other options to review to help in asset protection. An experienced estate planning attorney can review all options to determine the best route for your situation.

Protect Your Legacy

If we have worked hard all of our lives to protect and provide for our family, it makes sense that we would want most of that legacy to go to our loved ones rather than other parties. By putting together an effective estate plan, you can achieve this and continue to protect and provide for your loved ones long after you are gone.

With several tools to utilize to achieve your goals, an experienced estate planning attorney can review your situation, work with you to understand your wishes and plan accordingly. What works for you may not work for your neighbor or co-worker, which is why many multiple estate planning tools exist.

Contact our office today at (314) 347-3567 for your free consultation. We will sit down with you and your loved ones, discuss your concerns or priorities, and put together an effective strategy that helps you maximize the legacy you have worked hard for all your life and minimize the negative tax or Medicaid eligibility impacts that your assets may have.

We look forward to serving you and your loved ones.