Protecting The Rewards Of A Lifetime Of Hard Work

With more than 30 years of experience

Can I use trusts to avoid Medicaid’s five-year lookback period?

On Behalf of | Jan 21, 2020 | Estate planning |

Your parents are getting older, and you may think it is nearing the time when they may need nursing home care. Many people in the Atlanta Metro area plan on using Medicaid as a means for paying for nursing home care, but before a person can dip into their Medicaid funds, they cannot have more than $2,000 in countable assets. While not all assets will be included in that amount, it might be tempting to simply give assets away to loved ones while your parents are still living, so they can qualify for Medicaid. However, this is when the Medicaid five-year lookback period will stop that plan and could ultimately delay your parents’ eligibility for long-term care benefits.

Medicaid’s five-year look back period

Simply put, when your parents apply for Medicaid, Uncle Sam will look back over the past five years to see if any countable assets were given away or sold for less than what they were worth. Assets given away within that five-year look back period will prevent a person from obtaining Medicaid benefits until a certain amount of time has passed. This means that you may be in a situation in which you do not have the funds necessary to pay for long-term care when needed.

Trusts and Medicaid planning

There is one option worth considering when Medicaid planning: an irrevocable trust. Revocable trusts, which allow your parent to continue to access trust assets and modify the trust if they wish, are countable assets for Medicaid purposes. However, if your parent executes an irrevocable trust, they cannot put their hands on trust assets or modify the trust. Assets in an irrevocable trust are not considered to be countable assets when it comes to obtaining Medicaid.

Keep in mind that even assets placed in an irrevocable trust are subject to the five-year look back period. So, executing a trust with the assistance of an attorney well before Medicaid is needed can be beneficial. It is understandable that you want to preserve your parents’ ability to afford nursing home care, and if Medicaid is being considered, you may also want to consider an irrevocable trust. Attorneys in Northern Georgia can provide more information on this topic.