Setting up your Medicaid is a great way to secure yourself and your beneficiaries from incurring expensive healthcare costs. Setting up a Medicaid trust is a great strategy to help you meet the threshold for Medicaid asset limit if you have excess assets under your name. The assets that you use in your Medicaid trust are no longer considered to be your own but are now under Medicaid. If you’re considering setting up a Medicaid trust, here are some steps to consider for a beginner:
Get an attorney to help set up your Medicaid trust
Your Medicaid trust needs to be set up correctly to make sure that the assets that are being transferred to your trust are exempted from the Medicaid asset limit. Since the rules for this change from state to state, it is important to make sure your trust is being set up by someone well-versed with the laws in that particular state.
It is also important to set up the trust way before you need it to avoid violating Medicaid’s look-back rule. If you get the setup wrong, you might be ineligible for Medicaid or have your assets ceased later for Medicaid. Learn more about how a medicaid trust works.
Identify the types of assets that can go in an asset protection trust:
There are a variety of assets that can go into a Medicaid asset protection unit for example your home, other real estate assets, checking and savings bonds, and mutual bonds. Assets such as 401k’s AND IRAs are not advisable for transferring as the tax implication that is related to cashing out the plans are extremely high.
When you place trusts that can collect income in the Medicaid trust, you can still collect the income from them. Since there are income limits to Medicaid protection, the income from the secured assets should not exceed the set income limit. The income limit of most states as of 2021 was at $2,382 per month for a single senior applying for long-term care
Understand the cost of setting up your own Medicaid trust
The cost of setting up your Medicaid trust varies from state to state and goes from as low as $2,000 to a high of $12,000. Granted, the upfront cost might seem high or intimidating but in light of the nationwide average cost of nursing home care standing at over $7,750, the savings are high.
The cost of hiring an attorney also varies depending on different factors. Some attorneys may offer the services for setting up your trust as part of a package instead of being a standalone service. Other factors such as age and marital status will also affect the cost of setting up your trust.
Plan well ahead of time
As we mentioned earlier, there is a Medicaid’s look-back period which is 60 months in all states except California which is 30 months. The look-back period is meant for making sure that the assets given were not sold or given away for less than their actual value. Therefore, you need to create the Medicaid trust with the idea that it cannot be accessible for 2.5 years or 5 years.
With the knowledge of these steps and a little more planning, you can be able to successfully set up your Medicaid trust and kick start the journey to health and asset insurance. It sure is an investment that in the future you will thank you for!