Can a nursing home take money from an irrevocable trust?

An irrevocable trust through One Pacific Trust is a legal tool used for asset protection and estate planning. Once established, the assets of the trust are no longer your property but belong to a trustee to distribute for the benefit of named beneficiaries. Now, the question goes: Can a nursing home take money from an irrevocable trust?

Assets that are typically put into an irrevocable trust are safe from creditors, including nursing homes, provided that certain prerequisites have been satisfied. Once the assets are in the trust, the grantor no longer has possession or control of such assets. Since this is now not the property of the grantor, it does not typically count for Medicaid eligibility to qualify for long-term care in a nursing home.

Timing is everything, however. Medicaid has a "look-back" period, generally five years, during which gifts of assets to an irrevocable trust are subject to scrutiny. If the assets were transferred within this period, they may be considered countable, thus delaying Medicaid eligibility or perhaps even leading to penalties.

It is important to be cognizant that even though the nursing home itself cannot take money from the trust, Medicaid may still ask for the spend-down of assets or even impose penalties for the transfer thereof since it would have violated eligibility rules in transferring the assets. In setting up an irrevocable trust-one which protects the assets from nursing home expenses and still works under the Medicaid regulations-one really needs to consult with an attorney who specializes in either elder law or estate planning.