Does a living trust protect assets from Medicare seizure to cover medical or long term care bills?

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Does a living trust protect assets from Medicare seizure to cover medical or long term care bills?

My grandmother has recently been moved to a care facility. She has a living trust.

Asked on September 3, 2012 under Estate Planning, California


Catherine Blackburn / Blackburn Law Firm

Answered 10 years ago | Contributor

You or your family should consult an Elder Law attorney in your area as soon as possible.

It is important to distinguish between Medicare and Medicaid.  Neither actually seizes anything.  Medicare only pays for rehabilitative care in a nursing home and is limited to 100 days.  Medicaid can pay for long-term care in a nursing home but only if the resident meets very strict criteria.

"Straight" Medicare has deductibles and co-pays.  The beneficiary must pay these amounts (which can be substantial) if he or she does not have a supplement insurance.  If the person has a Medicare Advantage insurance (usually an HMO), she may not owe any deductilbes or co-pays, depending on the plan. 

People need to understand that Medicare will pay for nursing home care only so long as the resident is making progress with rehabiliation.  Benefits could be cut off fairly quickly.  It is not at all unusual for a person to go into a nursing home under Medicare and, within two weeks, be told that she needs to pay for care or switch to Medicaid in 3 days.  So, if your grandmother is in a nursing home, your family needs to talk with an Elder law attorney NOW.

Medicaid will pay for long-term nursing home care, but only if the person has very limited assets and a low monthly income.  State and federal Medicaid guidelines count certain types of assets and do not count other types. 

If the person has too many assets, the person must "spend down" their assets until they reach the Medicaid eligibility threshold.  State and federal law allow people to spend money for certain types of items or services (such as a pre-paid funeral plan or, in some states, a personal care contract) immediately so that they meet Medicaid criteria immediately.  These are complex rules and differ from state-to-state.  It is very important to consult a lawyer and it can preserve a great deal or all of your grandmother's assets.

Some states, like Florida, have strict limits for montly income.  If your grandmother's income exceeds that limit, she would be disqualified for Medicaid.  However, there are actions an Elder Law attorney can take to make  your grandmother qualify.  Again, talk to an attorney now.

An important point - DO NOT GIVE MONEY AWAY.  The federal Medicaid guidelines treat gifts very strictly.  As a general rule, money given away in order to qualify for Medicaid will make the person ineligible for Medicaid for a period of time - sometimes for a long period of time.

Please understand that perserving assets is not a way to cheat the government.  There is no cheating the government.  Like the IRS, they will find out and there will be consequences.  When a person lives in a nursing home under Medicaid reimbursement, she pays almost all of her income to the nursing home and Medicaid pays the rest.  In Florida, a nursing home resident can keep $35 per month for personal use.  That's all.  For everything that Medicaid does not pay for.  Thus, if a person should have additional services, like a sitter, she has to preserve assets to pay for it.  She has to preserve assets to pay for clothing, hair care, entertainment, special treats, etc.

Bottom line - if your loved one has even modest assets, do not handle this issue by yourself.  Do not allow the nursing home to handle it for you, no matter what they say.  Find out the best way to structure assets by consulting an Elder Law attorney.

IMPORTANT NOTICE: The Answer(s) provided above are for general information only. The attorney providing the answer was not serving as the attorney for the person submitting the question or in any attorney-client relationship with such person. Laws may vary from state to state, and sometimes change. Tiny variations in the facts, or a fact not set forth in a question, often can change a legal outcome or an attorney's conclusion. Although has verified the attorney was admitted to practice law in at least one jurisdiction, he or she may not be authorized to practice law in the jurisdiction referred to in the question, nor is he or she necessarily experienced in the area of the law involved. Unlike the information in the Answer(s) above, upon which you should NOT rely, for personal advice you can rely upon we suggest you retain an attorney to represent you.

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