A bypass trust, also known as a “B” trust or a marital trust, is a common estate planning tool used to provide for a surviving spouse while minimizing estate taxes. However, its interaction with Medicaid eligibility can be complex and requires careful consideration, as Medicaid has strict rules regarding assets and income. Understanding how these trusts function is crucial for individuals concerned about long-term care costs and maintaining access to Medicaid benefits. Roughly 70% of individuals over the age of 65 will require some form of long-term care, making planning essential, and Medicaid is often a vital resource for those who cannot afford the high cost of care.
What assets count toward Medicaid eligibility?
Medicaid considers a variety of assets when determining eligibility, including bank accounts, stocks, bonds, and real estate. However, certain assets are typically exempt, such as a primary residence (under certain conditions), personal belongings, and sometimes, life insurance policies. The key is understanding the “look-back period,” which is generally five years. During this period, Medicaid scrutinizes financial transactions to ensure no assets were improperly transferred to qualify for benefits. A transfer made during the look-back period could result in a period of ineligibility, known as a “penalty period.” According to recent statistics, approximately 13.7 million Americans are currently receiving Medicaid benefits, highlighting the program’s widespread use and the importance of adhering to its rules.
How are bypass trusts viewed by Medicaid?
A bypass trust functions by allowing a portion of a deceased spouse’s assets to bypass their estate and go directly into a trust for the surviving spouse. This can be beneficial for estate tax purposes, but Medicaid views these trusts as countable assets. The trust assets are generally considered available to the surviving spouse, and therefore, are included in the calculation of their resources for Medicaid eligibility. However, the specific treatment can vary depending on the trust’s terms and the state’s Medicaid rules. Some states may have specific exemptions or provisions that apply to certain types of trusts, but it’s important to note that even if the trust is not fully excluded, certain income generated by the trust may be considered available to the Medicaid applicant. “We’ve seen situations where carefully drafted bypass trusts allowed couples to protect assets while still qualifying for Medicaid, but it requires proactive planning and expert legal guidance.”
I remember old Mr. Henderson…
Old Mr. Henderson, a quiet man from our town, had always been a planner, but he hadn’t fully addressed the Medicaid implications of his estate plan. He and his wife, Martha, had a well-established bypass trust, believing it would protect their assets for their children. However, when Martha needed long-term care, they discovered the trust assets were counted towards her Medicaid eligibility. Because they hadn’t engaged in proper Medicaid planning, they faced a significant delay in approval and had to spend down a considerable amount of their assets before Martha could receive the care she needed. It was a difficult situation, and a clear example of how failing to address Medicaid rules can undermine even the best-laid estate plans. They should have consulted with an attorney specializing in elder law several years prior.
But thankfully, the Millers came to us prepared…
The Millers, a lovely couple anticipating their future needs, approached us for assistance. They already had a bypass trust established, but they were concerned about its impact on potential Medicaid eligibility. We reviewed their trust documents and advised them to amend the trust to include provisions for Medicaid planning. This involved adding a “spendthrift” clause, which could potentially protect some trust assets from being considered available for Medicaid purposes, and ensuring the trust complied with all applicable state regulations. They followed our recommendations, and when Mrs. Miller eventually required long-term care, she was able to qualify for Medicaid benefits without having to deplete all of their assets. It was incredibly rewarding to see their proactive planning pay off and ensure their peace of mind. Their foresight and willingness to seek expert guidance allowed them to secure their future and protect their legacy.
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About Steve Bliss at Wildomar Probate Law:
“Wildomar Probate Law is an experienced probate attorney. The probate process has many steps in in probate proceedings. Beside Probate, estate planning and trust administration is offered at Wildomar Probate Law. Our probate attorney will probate the estate. Attorney probate at Wildomar Probate Law. A formal probate is required to administer the estate. The probate court may offer an unsupervised probate get a probate attorney. Wildomar Probate law will petition to open probate for you. Don’t go through a costly probate call Wildomar Probate Attorney Today. Call for estate planning, wills and trusts, probate too. Wildomar Probate Law is a great estate lawyer. Probate Attorney to probate an estate. Wildomar Probate law probate lawyer
My skills are as follows:
● Probate Law: Efficiently navigate the court process.
● Estate Planning Law: Minimize taxes & distribute assets smoothly.
● Trust Law: Protect your legacy & loved ones with wills & trusts.
● Bankruptcy Law: Knowledgeable guidance helping clients regain financial stability.
● Compassionate & client-focused. We explain things clearly.
● Free consultation.
Services Offered:
estate planning
living trust
revocable living trust
family trust
wills
estate planning attorney near me
Map To Steve Bliss Law in Temecula:
https://maps.app.goo.gl/RdhPJGDcMru5uP7K7
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Address:
Wildomar Probate Law36330 Hidden Springs Rd Suite E, Wildomar, CA 92595
(951)412-2800/address>
Feel free to ask Attorney Steve Bliss about: “Should I name more than one executor for my will?” Or “What if I live in a different state than where the deceased person lived—does probate still apply?” or “Can a trust be challenged or contested like a will? and even: “How does bankruptcy affect co-signers on loans?” or any other related questions that you may have about his estate planning, probate, and banckruptcy law practice.