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Trusts

Trusts formerly played a much more significant role in Medicaid planning. Thirty years ago you could put your home into a simple Living Revocable Trust (explained in detail in Chapter 4) and maintain control of your home while protecting it from the state’s Medicaid lien upon your death and the later death of a spouse. People could also set up Irrevocable Trusts that would permit the trustee of their choosing to be able, in the trustee’s discretion, to give whatever was in the trust in whatever amounts to the senior citizens who had set up the trust. As more and more people took advantage of what some considered to be loopholes in the law, Congress and the various states took steps to close those loopholes. To be effective for Medicaid purposes, trusts have so many limitations put on them by law that they are a good choice for fewer and fewer people.

The foremost drawback to using a trust as a part of Medicaid planning is that the look-back period for anyone with a trust is extended from three years to five years. So, for example, if you just gave away your assets to your children, the amounts of those gifts, regardless of how high that number might be, would be irrelevant after three years. However, if you put that same amount into a trust, doing so might bring about as much as an additional two years of disqualification from Medicaid eligibility.


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