Many people in Indiana may be concerned about how they will cover the costs of long-term nursing care in the future. For many seniors, Medicaid is an important lifeline to pay for ongoing nursing home care, especially as the cost of such care continues to rise. However, in order to obtain and keep eligibility for Medicaid coverage for long-term care, people must spend down their assets to show that they cannot afford to pay for nursing home care themselves.
Planning for Medicaid eligibility
Because many seniors still want to leave a legacy for their loved ones, they may look for ways to protect their assets for their beneficiaries while still being able to receive Medicaid coverage for long-term nursing care. One tool that people may use is an irrevocable trust, which places assets outside the reach of Medicaid. In order to assess eligibility for coverage, Medicaid examines income and assets. While each state varies, Medicaid tends to examine bank accounts, cash value life insurance policies, real estate other than your primary residence, stocks, bonds and investments.
Why an irrevocable trust?
Irrevocable trusts are different from other types of trusts because they generally cannot be cancelled or revoked by the creator. While these trusts are still subject to the look-back period, these assets are not calculated as countable for Medicaid eligibility, estate taxes or probates. Instead, they belong to the named trust and its trustee, and they have complete authority over how the assets in the trust are used.
While Medicaid examines assets at the point a person applies for eligibility, there is also a “look-back” period of five years. This period aims to exclude people who have given away their assets right before applying for Medicaid. Essentially, the look-back period imposes a delay on eligibility for Medicaid coverage. This makes it important to plan in advance for future Medicaid applications.