Does a Revocable Trust Protect Assets From Medicaid in Maryland?

Does a Revocable Trust Protect Assets From Medicaid in Maryland?

Are you worried about losing your hard-earned assets to long-term care costs? One strategy you might be considering is a revocable trust, but the question lingers: Does a revocable trust protect assets from Medicaid in Maryland?

Medicaid offers valuable assistance for long-term care, but eligibility hinges on meeting strict asset limits. Exceeding these limits can disqualify you from Medicaid. Fortunately, various legal tools can help you safeguard your assets and ensure eligibility.

Can a revocable trust be your solution for asset protection and Medicaid eligibility? Let’s delve into the facts and uncover the best strategies to safeguard your assets and secure benefits.

Understanding Revocable Trusts

Imagine a box where you keep your most valuable possessions. This box, known as a “revocable trust” or “revocable living trust,” allows you to retain complete control and access to your assets–all while providing a plan for their future allocation. You can add or remove items whenever you want, and the box remains yours until you decide otherwise.

Revocable living trusts have various estate planning benefits:

Avoiding Probate

Revocable trusts allow certain assets to bypass the often lengthy and costly legal process of probate. This ensures your assets are distributed smoothly and according to your wishes.

Maintaining Privacy

All probate proceedings are public. Bypassing probate allows you to keep your estate plan confidential, shielding your financial details from the public eye.

Flexibility

You can tailor your revocable trust to your specific needs and circumstances, allowing for changes as your life unfolds. Some common examples of major changes include new family members, divorce, or the passing of a loved one.

However, there is a common misconception around the question, “Does a revocable trust protect assets from Medicaid in Maryland?”

So, Does a Revocable Trust Protect Assets From Medicaid in Maryland?

Now that we’ve clarified what a revocable trust is and what it does, let’s address the critical question: Does a revocable trust protect assets from Medicaid in Maryland?

Unfortunately, the answer is no, a revocable trust does not shield your assets from Medicaid. This is because you retain complete ownership and control over any asset placed within a revocable trust and are able to avoid probate. As far as Medicaid is concerned, these assets remain yours and contribute to your total financial value.

Now, let’s explore other valuable estate planning tools that can help you preserve your assets AND qualify for Medicaid.

Ways to Protect Your Assets and Qualify for Medicaid

Let’s explore some effective methods that can protect your assets from Medicaid:

Irrevocable Medicaid Asset Protection Trusts (MAPTs)

Unlike revocable trusts, MAPTs are irrevocable. MAPTs give control and ownership of your assets to a designated trustee. Because those assets are not under your control, they are considered “non-countable,” meaning Medicaid cannot count those assets towards your financial limit.

Here’s How MAPTs Function:

  • You transfer assets to the trust, typically 5+ years before applying for Medicaid.
  • The trustee manages the trust according to your designated wishes, ensuring your needs are met while protecting the assets.
  • After a specified period (usually five years), you can no longer access or modify the trust assets.

Other Medicaid Planning Tools and Techniques

Medicaid-Compliant Annuities

Specific kinds of annuities allow you to convert overscaled assets into an income stream that Medicaid considers exempt because it is now income, effectively shielding those assets from their eligibility calculations. This is typically used with married couples.

Life Estates Without Powers

This strategy entails maintaining a life estate, allowing you to reside in the property until your passing, while designating a remainder interest to a chosen beneficiary. It’s essential to understand that Life Estates with Powers are not exempt from Medicaid considerations.

Consequently, while you retain the right to live in and enjoy the property, it is not considered ‘your property’ by Medicaid.

Spending-Down Your Assets

The “spend-down” strategy involves strategically utilizing certain expenses to reduce your income and meet Medicaid income eligibility requirements. This can include:

  • Prepaying medical bills,
  • Purchasing specific long-term care insurance plans,
  • Contributing to allowable deductions like home improvements or burial expenses, and
  • Much more.

Not every asset protection method is for everyone. Talk to an estate planning attorney today to discuss your unique situation and develop a personalized plan that optimizes asset protection while ensuring your eligibility for Medicaid.

Maryland Medicaid Eligibility and Asset Considerations

Now that we’ve discussed the limitations of revocable trusts in asset protection, let’s delve into the specific details of Medicaid eligibility and asset considerations in Maryland.

Qualifying for Medicaid in Maryland involves meeting specific financial criteria.

Asset Limits:

This is where things get a bit more complicated. In Maryland, the asset limit for an individual applying for long-term care Medicaid is a mere $2,500 in 2023. This means that your total countable assets–excluding exempt assets–cannot exceed this amount.

For married couples, the asset limit is $4,000 in 2023, with $148,620 spousal protection allowance (depending upon your circumstances).

The 5-Year Look-Back Period:

Transferring assets within five years of applying for Medicaid can trigger a “look-back period” review. This means Medicaid will scrutinize your financial history to identify any potentially disqualifying transfers.

Therefore, transferring assets to any trust within five years of applying for Medicaid can disqualify you from Medicaid benefits.

Speak to an estate planning attorney to discuss your Medicaid asset protection options.

How a Medicaid Asset Protection Lawyer Can Help

An experienced Medicaid asset protection attorney can:

  • Cut through complex Medicaid laws and eligibility for Maryland.
  • Tailor asset protection for your unique situation and goals.
  • Help you to minimize Medicaid penalties and qualify for Medicaid.
  • Guide you through the application process for a smooth journey.
  • Provide continuous support as your needs evolve.

Schedule a Risk-Free Consultation

If you need help planning for Medicaid or have other questions related to “Does a revocable trust protect assets from Medicaid in Maryland,” schedule a Risk-Free Consultation today or call us at 443-579-4529.

About Adam Zimmerman

Adam Zimmerman is known for his unique ability to put people at ease. Within minutes of meeting Adam, his clients realize he is not the stereotypical attorney and is genuinely invested in helping them through their life situations. He is committed to empowering his clients to be decision makers in the process, so they are knowledgeable about the course of action they decide over their affairs.