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The Value of an Irrevocable Trust for Medicaid Planning

One effective way to preserve more of your assets and property for your loved ones is through sound Medicaid planning, which may allow you to meet the asset limited to qualify for Medicaid benefits.

However, taking this step requires you to give away your assets, and so you may run the risk that your beneficiaries may lose them. To help prevent this possibility, you may place your assets in an irrevocable trust, in which a designated party (known as the “trustee”) holds legal title to and oversees the assets on behalf of the beneficiaries.

If set up correctly, these trusts prevent the assets contained within them from being counted against Medicaid’s limits. However, you should know that Medicaid does not take the same approach to revocable trusts, making them unhelpful for Medicaid planning.

What is an irrevocable trust?

Once established, an irrevocable cannot be changed by anyone — including the creator (known as the “grantor”). The income from the trust is usually payable to you, as the grantor, and then the principal transfers to your beneficiaries after you pass away. This tends to work well, as you can use the trust income to cover your living expenses. However, the principal cannot go to either you or your spouse.

Medicaid does not consider the principal in an irrevocable trust to be a resource, although the trust income will need to be used to pay for the costs of a nursing home, if it becomes necessary in the future.

Before moving forward, you should understand that these trusts tend to be inflexible, and you will not be able to access the funds in the trust, even in an emergency situation. If you do decide to set up an irrevocable trust, you should be sure to leave enough extra money to serve as a cushion, just in case you need it.

For further information on establishing a trust as you engage in Medicaid planning, speak with a skilled Florida estate planning attorney at the Charles Law Offices.

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