As you plan for retirement, Medicare benefits will likely be an important consideration. You can count on Medicare to cover most of your routine medical expenses after you retire, and you may have to budget for supplemental plans for prescription medication. However, Medicare does have some noticeable gaps in coverage it provides beyond the limits of its drug coverage.
If someone ends up in a nursing home, Medicare benefits will not apply to their costs. Medicaid coverage is necessary when someone requires skilled nursing support in their home, extended rehabilitation care or a stay in a nursing home. Many adults preparing for retirement create trusts as a means of qualifying for Medicaid.
What are the primary benefits of creating a trust as part of your Medicaid planning process?
You can get benefits quickly
Medicaid has very strict limitations for both personal property and income for applicants. Almost everything you own other than your house could count against you when you apply for Medicaid, which is why you may want to create a trust.
The trust becomes the primary owner of those assets, which means those accounts won’t prevent you from qualifying or trigger a penalty. Penalties can force you to pay on your own for many months of care and can leave you without the support you need. Given that up to 60 months of financial transactions are subject to scrutiny, advance planning is crucial.
You can protect your home from estate recovery efforts
Your house won’t prevent you from getting Medicaid when you need it, but it will be vulnerable to claims by the state after your death. The government can ask the probate courts for any property in your name, possibly including your home, to help repay the cost of your care before your death.
Property that you move into a trust well before you require Medicaid benefits may not be at risk of creditor claims or Medicaid estate recovery efforts during estate administration. Your home and other assets may pass to your intended beneficiaries instead of the government.
Learning about the benefits of using a trust to plan for Medicaid might inspire you to think about your future and your legacy.