Does an Irrevocable Trust Protect Assets from Nursing Home?

The bottom line is that, yes, an irrevocable trust can protect your assets from nursing home costs, but this must be carefully and well-planned in advance. One of the major concerns when someone needs long-term care and applies for Medicaid is having to spend down personal assets to pay for nursing home expenses. Medicaid has strict asset limits, and having too many assets often means a person will be expected to use those assets to pay for their care before Medicaid will cover them. That's where the irrevocable trust applies. At One Pacific Trust, we specialize in guiding clients through these complex planning processes to safeguard their assets.

How an Irrevocable Trust Protects Assets from Nursing Home Costs: Once assets, such as a home or other financial assets, are transferred into an irrevocable trust, they are no longer considered to be the property of the person who created the trust—the grantor. This, in turn, would mean that for Medicaid eligibility purposes, these assets may be protected and not have to be spent on nursing home costs. However, most states in the U.S. have a Medicaid "look-back period" of usually five years, and any transfer of assets into a trust would need to be made at least five years before application to Medicaid. Transfers made within this period may disqualify the applicant from receiving Medicaid benefits for a certain period of time.

Important Considerations:

• Asset Control: Once assets are transferred into an irrevocable trust, they are beyond the grantor's control. The trust would then be managed by a different trustee who would have to follow the instructions of the trust regarding asset management and distribution.
• Legal Help: The process of setting up an irrevocable trust is very elaborate in terms of protection against nursing home costs. This is done with due planning and professional advice. It would also involve an attorney or financial advisor in the process to provide proper structuring of the trust and adhere to all applicable laws. One Pacific Trust offers professional services to help clients navigate these requirements effectively.

In other words, one may protect assets against nursing home costs by using an irrevocable trust. The problem with that is the requirement for advanced planning since one actually needs to understand clearly the rules of Medicaid and the use of look-back periods. With One Pacific Trust, you can ensure that your estate planning aligns with your long-term care needs and secures your legacy for future generations.