Will Retirement Funds in a Trust be Protected When the Beneficiary Applies for Medicaid?

 In Long-Term Care Planning, Special Needs Planning

Photo by National Cancer Institute on Unsplash


Parents (now both deceased) set up an irrevocable trust for their handicapped daughter with the Trust as the only beneficiary. Only assets in estate is an inherited IRA, a TOD account (now in name of trust), and a non-spousal/non-qualified annuity, all with the Trust as the sole beneficiary. Daughter is in a nursing home. Can any of these assets be preserved for the daughter under the trust and her still qualify for a Medicaid bed? There are no physical assets and the only income the daughter has outside of these three assets is Social Security. The annuity has to be disbursed over a five-year period and I assume it can go into the old TOD account which is now in the trust. But I don’t know how Medicaid looks at that. Thank you!


Without seeing the trust, I cannot give you a definite answer, but it sounds like everything was set up correctly to protect the assets and permit the daughter to qualify for Medicaid without spending down the trust funds. Depending on how the trust is written, it may be necessary to liquidate the IRA and pay taxes on the distributions within five years of the death of the second parent to die. It sounds like this is what is happening with the annuity, but since it’s a non-qualified annuity that must be a provision of the annuity contract rather than a tax law requirement. A local elder law or special needs planning attorney could review the trust and confirm this, perhaps the attorney who drew up the trust to begin with.


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Will Retirement Funds in a Trust be Protected When the Beneficiary Applies for Medicaid?

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