Is a Trust Good for Protecting Assets from Medicaid?
This is a complicated question. It needs to be understood that my answer is limited to Texas. In general the answer is no, especially if you are over age 65. In other states a trust called a Medicaid Asset Protection Trust can be effective, but not in Texas. I am limiting this answer mostly to that question being “How do I protect my assets from the nursing home?”
If you are under age 65, have sufficient assets to pay for your support for 60 months and are willing to give up control of the assets then there is a form of Trust that will protect the transferred assets from Medicaid. Most people either do not have sufficient assets or are unwilling to give up control or benefit of the assets.
There are special trusts called Special Needs Trusts or sometimes called Supplemental Needs Trusts (SNT). These are specially crafted trusts using a Federal statute to allow persons who are disabled to receive limited benefit from the trust assets and income. The trust terms limit the payment of income and principal to purposes other than what Medicaid or SSI would pay for. In other words the SNT cannot pay for housing, food or medical care. Persons under age 65 may self-fund a Special Needs Trust. A spouse or anyone else can fund a third-party trust with assets not owned by the disabled beneficiary at any age. I often place a spousal Special Needs Trust in Wills that I draft for married couples.
A self-funded SNT must contain a repayment clause requiring any trust assets remaining after the death of the beneficiary to be paid to the State or States with a claim for care under Medicaid.