Must I Put My Home in Trust to Protect it from Medicaid?
Is it necessary to put assets into a trust, and does this protect your home from Medicaid?
It’s certainly not necessary to place assets into a trust, but trusts can provide several advantages, including probate avoidance and better management in the event of incapacity. A trust can also protect a home from estate recovery if the owner receives Medicaid benefits or for the proceeds of the sale of a home from having to be spent down to pay for care. Here’s a short primer on how that works.
Medicaid is the federal/state program that provides health coverage for those who cannot afford their own insurance. In addition, unlike most insurance, it covers the cost of nursing homes and in some states can also assist with the cost of home and assisted living care. But to qualify for Medicaid, you have to be deemed “poor” under its very complicated rules. In most cases, you can keep your house and still get Medicaid coverage. But this can create two issues:
First, if you move to a nursing home and sell your house, it’s no longer protected and the proceeds of the sale will have to be spent down before Medicaid will again begin covering your cost of care. This can force people to keep homes they no longer need and can no longer afford to maintain.
Second, if you do keep the home, when you pass away the state will have a claim against your home to recover its costs of paying for your care. This is called “estate recovery.”
An irrevocable trust can protect against both risks. It will allow you to keep the proceeds of a sale of the house and it will protect it from estate recovery. However, putting your house into an irrevocable causes you to be ineligible for Medicaid for the subsequent five years and you must give up access to the proceeds of any sale.
As you can see, this is rather complicated. To add to the complexity, the rules are somewhat different in every state. I recommend that you consult with an elder law attorney. You can find one on this website: www.elderlawanswers.com.