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Medicaid Planning and Supplemental Needs Trusts

I draft Supplemental Needs Trusts (also known as Special Needs Trusts) and advise regarding Medicaid eligibility rules, when necessary to protect a beneficiary's entitlement to public assistance benefits.

Medicare and private health insurance do not pay for long-term custodial care, whether in a nursing home, assisted living facility, or at home.  A person needing long-term custodial care in a nursing home must pay the nursing home costs from his/her own resources, or with the help of a Long-Term Care Insurance Policy, until  s/he qualifies for Medicaid. 

Medicaid (MoHealthNet in Missouri) nursing home benefits are available only for those who are disabled, blind, or over 65 years of age, and who have very few assets.  (Those who have had long-term care benefits paid by a Long-Term Care Insurance policy approved under Missouri's Long-Term Care Partnership Plan may also be eligible for Medicaid under certain circumstances.)

In general, a person cannot give away money or other assets in order to qualify for Medicaid nursing home benefits. When applying for Missouri Medicaid benefits, the applicant must list all assets, including jointly-owned bank accounts or other jointly-owned property, and must report any gifts of money or property, and any property sales, made within the preceding five (5) years. If the Medicaid applicant or his/her spouse gave away any money or property, or sold any property for less than its fair market value, within the preceding five (5) years, the applicant usually will be ineligible for Medicaid nursing home benefits for a period of time, based on the value of money or property gifted, or property sold for less than the fair market value. 

In addition, if a Medicaid applicant owns a joint account with a person to whom s/he is not married, and if the joint owner has withdrawn funds from the joint account within the preceding five (5) years and did not use the funds for the applicant’s needs, such a withdrawal is likely to result in the applicant being ineligible for Medicaid nursing home benefits for a period of time. 

Because of these Medicaid rules, a beneficiary of your estate also cannot turn down or give away the inheritance from you in order to qualify for Medicaid nursing home benefits, unless this is done more than five (5) years before applying for Medicaid.  Likewise, if s/he already is receiving Medicaid nursing home benefits, s/he cannot turn down or give away the inheritance in order to maintain Medicaid eligibility. 

Therefore, if you leave a share of your estate outright to a beneficiary (including your spouse) who has serious disabilities or a progressive disease, or who is 65 years of age or older or blind, the inheritance will delay or jeopardize his/her eligibility for nursing home Medicaid.  Proper planning, including a Supplemental Needs Trust, can avoid this result.

A Supplemental Needs Trust (Special Needs Trust) allows your bequest to be used to supplement the beneficiary’s public assistance benefits (such as Medicaid or Supplemental Security Income), rather than replacing the benefits, and protects your beneficiary’s eligibility for public assistance benefits.  The assets and income of the trust can be used to pay for activities and needs that Medicaid or other programs do not cover, improving the beneficiary's quality of life.  Properly establishing such a trust for the beneficiary means that the inheritance is not counted by public assistance programs when determining the beneficiary’s eligibility.  In establishing such a trust, a number of technical requirements must be followed.

If your beneficiary is not elderly or disabled now, but you are concerned that s/he might need public assistance benefits when s/he becomes elderly or if s/he later suffers from a serious disability, a Supplemental Needs Trust also can be drafted to provide for those future possibilities.