In New York, estate planning and Medicaid eligibility often intersect. If an heir is eligible for Medicaid and a person creating an estate plan is leaving them assets, it could impact whether they maintain their Medicaid eligibility.
While leaving property to a loved one whether it is cash, property or other items of value, it should be considered how the recipient’s Medicaid could be altered. They might lose it completely. A trust is a way to avoid this. Before naming a person in a trust, the grantor should understand the effect of their Medicaid eligibility.
Know the difference between revocable and irrevocable trusts
When creating the trust, the grantor must know that a revocable trust does impact Medicaid eligibility. Irrevocable trusts can prevent a person’s Medicaid eligibility from being hindered.
As the name suggests, the revocable trust can be changed. They can alter its terms or end it completely. For example, the grantor can change how assets in the trust are distributed and managed. When a person has a revocable trust, they often use it because they want to avoid a conventional will and the need for probate. The beneficiaries have access to it immediately.
That can cause problems with Medicaid as it is based on a person’s income and assets. When they were initially eligible for Medicaid, it was because they did not have significant assets. That will change with a revocable trust.
With an irrevocable trust, the grantor surrenders control of the assets. This protects it from the income limits under which Medicaid eligibility is determined. It cannot be altered once it goes into effect. If there is an unusual situation in which it can be changed, all parties need to agree. These types of trusts are generally used for tax purposes, but a trustee’s Medicaid can be shielded.
When there is a person who needs long-term care and relies on Medicaid, a Special Needs Trust could be a better option. That would be a disabled person under 65. With this type of trust, Medicaid would need to be repaid when the person dies.
Seek professional help that understands estate planning and Medicaid
Given how complex estate planning, trusts, and Medicaid eligibility can be, those who have assets to leave to heirs but do not want to harm that person’s ability to receive Medicaid should know their options. A trust can be beneficial, but picking the right type of trust is key. From the start, it is useful to have professional advice to make sure there are no problems with Medicaid eligibility.
