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What is a Medicaid planning trust?

On Behalf of | Jun 28, 2024 | Estate Planning & Elder Law

Many Americans are in good shape well into their 80s and even beyond, but the longer we live, the more likely we are to develop mobility problems and other health issues that require extensive care. In fact, according to one widely-cited statistics, 70% of Americans who reach age 65 will require some kind of long-term care during the remainder of their lives.

And this long-term care can be extremely expensive. Currently in Virginia, in-home care costs about $60,000 per year on average. The average cost of a year in a nursing home is closer to $110,000.

With the costs this high, families can quickly exhaust their savings. A person who hoped to leave a legacy to their children and grandchildren can find they have nothing left to put in their estate plan.

How will you pay for care?

Long-term care insurance can help pay for some of these costs, but many people have insufficient insurance coverage. Many American seniors rely on Medicare benefits to help pay for their health care, but Medicare generally does not pay for long-term care.

Another government program, Medicaid, can pay for long-term care. However, Medicaid is intended for people of all ages with limited income and assets. Medicaid eligibility requirements are somewhat complicated, but currently in Virginia, a person seeking Medicaid for nursing home care must have income of less than $3,000 per month and very limited assets.

Using a trust

A Medicaid planning trust (also known as a Medicaid qualifying trust) offers one way to manage this problem.

When one puts their property in a trust, they no longer technically own it. If the trust is set up and managed properly, this means the assets in the trust are not counted against the person when they apply for Medicaid.

In this way, they can preserve assets to pass on to their loved ones, while also getting the long-term care they need.