If you need healthcare that you cannot afford, then the government expects you to use your money until it is gone, and then use up your assets until those are gone, and Medicaid will pay for the rest. If you have an asset such as a home that you want to protect for your heirs, but you are still alive and you need healthcare that you can’t pay for, you could place the home into an irrevocable trust to protect that asset.
To make their measurements, Medicaid uses a set of standards called Medicaid Asset Limits in order to determine a patient’s eligibility for care without having to pay a premium, (in most states a nursing home resident covered by Medicaid may have no more than $2,000 in countable assets). If you transfer assets into certain trusts to protect them, and you were the former owner, Medicaid has legal ways to transfer or release title to those assets.
You have to use an irrevocable trust, because a revocable trust is like no trust at all until the day that you die, at which time it automatically becomes irrevocable. With a revocable trust you can make any change you like until you die. A revocable trust can not protect the house if you’re trying to receive Medicaid because you are still alive. Has to be an irrevocable trust that now owns your old assets, and that means that you no longer own those assets and have no rights to them, and Medicaid has no rights to them either. The problems start when people put their assets into a trust and try to find ways to continue to enjoy the benefits of those assets like they did before they formed the trust.
There were a couple of court decisions that came out of Massachusetts recently that bring these problems to light. A man put his home into an irrevocable trust but continued to live there. The courts eventually ruled that MassHealth (Medicaid in Massachusetts) could not count the home as an asset for the limits test because the trust provision allowed him to live there. On the flip side, the man’s right to use and occupy the home as akin to receiving fair market value rental income from the home, and that raised his income to the threshold where he was required to pay a monthly deductible to receive healthcare.
If you have an older trust you should have it reviewed to determine that it is in compliance with current laws. Your attorney must be an expert in this field. If this subject is of interest to you then seek out professional advice, and a good place to start is always with your CPA.