Medicaid Qualifying Trusts

By May 22, 2009Uncategorized

In the 80s and early 90s, Elder Law attorneys often prepared irrevocable trusts that were suppose to help qualify a person for Medicaid should they eventually get sick. In these trusts, all of the parent’s money was transferred into a trust, giving the trustee (usually a child of the parent) discretionary control to use the money for the benefit of the parent. In 1993, however, Congress passed federal rules that, in effect, turned these trusts into Medicaid Dis-Qualifying Trusts. Medicaid programs now view the discretionary control as follows: If the trustee has any ability to give the Trustor (i.e. parent ) any money from the trust, they have the ability to give the parent all the money from the trust.

Sadly, there are many of these trusts that have been created that families believe are still valid. In fact, in one case, the family met with an estate/trust lawyer several years ago to ascertain whether it was valid. Because the lawyer did not specialize in the Elder law genre, she did not know about the odd change in the law; thus, she said to simply follow the trust as it was written. The problem with this advice is that, if the parent goes into the care home, the trust prevents any money to be used for the benefit of the parent; and, at the same time, ALTCS would not allow for eligibility based on federal law. Shortly stated, then, the parent could be left with no payment source for the needed care.

Our advice: The rules in this area of the law have and will continue to change. Thus, if there is concern for long term care in your family, you should seek consultation and instruction from an Elder Law attorney-even if you think you previously have.