09 Apr Revocable land trusts and Medicaid

Q. Would a revocable land trust protect a house from Medicaid?
— Asking

A. Protecting or hiding assets from Medicaid isn’t an easy thing to try.

The kind of trust you mention won’t help at all in any effort to protect an asset from Medicaid’s spend down requirements, said Yale Hauptman, an estate planning attorney with Hauptman and Hauptman in Livingston.

He said that’s because a trust that is revocable can be revoked or terminated at any time by the grantor.

“Medicaid considers assets in a revocable trust as countable because the Medicaid applicant who places the home in the trust he/she created has complete control, meaning he/she can take back the asset at any time,” Hauptman said.

Medicaid will deny the application, effectively telling the applicant to “sell the home, spend down the assets and then come back and reapply when you have no more than $2,000 in assets in your name and in the revocable trust combined,” he said.

Hauptman said assets in an irrevocable trust may be excluded from Medicaid spend down rules, depending on the terms of the trust. However, he said, even if the home was placed in an irrevocable trust that would exclude it from Medicaid, the transfer to the trust must be done more than five years before applying for Medicaid so as to avoid the five-year lookback and Medicaid penalty provisions.

“If there is the possibility of needing Medicaid down the road, it is best to consult with an elder law attorney who has knowledge of the Medicaid regulations before attempting to set up such a trust,” he said.

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