Trusts can be used to protect real estate, cash, other financial assets, and even valuable tangible assets such as art or jewelry. For example, if you own bank accounts, certificates of deposit and securities, Medicaid will insist you use almost all of these to pay for your care before it provides even a dollar of benefits. By transferring these financial reserves to a trust, they can no longer be regarded as your “resources” for Medicaid purposes. The assets in the trust will be protected.
Irrevocable Medicaid Trusts, also known as “asset protection trusts” or “Medicaid asset protection trusts” can be structured so that the income generated from the assets in the trust will be paid to you. That means the income can be spent to help maintain the lifestyle you’ve worked hard to create. While you will have no right to access or demand principal from the trust, your trustees can be given the discretion to distribute principal to beneficiaries who can use this money for your benefit.
If the trust holds title to your home, you will still have the right to live there for the rest of your life, or in another residence that the trust might purchase in the future. Of course, if you own a co-op apartment, permission of the co-op Board of Directors must first be obtained before you can transfer your co-op shares and proprietary lease into the trust.
Aside from protecting your assets from Medicaid eligibility requirements, transferring assets to a trust is almost always preferable to transferring money to children directly. Here’s why. Most trusts protect the money from exposure to future creditors, lawsuits and legal liability. If a child is holding your money, and gets into an auto accident and is at fault, suffers a business failure or a divorce, or even dies before you, the money could be exposed to potential loss. Money placed in most trust structures will be better protected than funds held by individuals.