Gaining Immediate Medicaid Eligibility

• October 23, 2024 at 10:18 am #34964
  Tyler Barrett

  I have a client who wishes to obtain immediate Medicaid eligibility. He is under the age of 65 and is disabled (severe case of MS). His assets consist primarily of a residence which he rents out to tenants (in other words, it’s not his primary residence). Client’s son is also disabled. I discussed establishing a sole benefit trust for the son; but client wants to provide for others in his estate plan (if he dies, he wishes for his mother and siblings to receive a portion of his estate) and further does not want the rentals distributed to or for the benefit of his son at this time. IMO, that would just leave a Medicaid Asset Protection Trust and waiting out the 5-year lookback period as the only viable option. Does anyone see things differently?

  October 23, 2024 at 10:43 am #34965
  Cynthia Griffin

  I think the hardest part of this is that his asset is tied up in real estate. I don’t see any way around him selling the property. Even if he could use a homestead exemption, estate recovery would get it later. My policy is always to deal with it up front. I’d recommend selling the house immediately so that everything is liquid.

  Then I’d use a mix – go ahead and put into the sole benefit trust what he wants to protect for the son. That’ll take that off the table. With the rest of the money, I’d have him prepay for his funeral, then utilize a gift+annuity strategy for whatever is left. That’ll mean that he saves whatever he leaves his son, the money for the prepaid funeral, and roughly half (very roughly) of whatever is left after that. It would be a decent savings. He’ll have to put the gift into a Medicaid Asset Protection Trust with mom and siblings as beneficiaries.

  There could be other exemptions that I am not aware of depending on the circumstances and the state, but that’s the strategy I’d use with the facts given.

  Cynthia

  October 23, 2024 at 11:30 am #34968
  Annette Rhodes

  Since your client is under 65, what about a sole benefit trust for himself? Generally, Medicaid would be reimbursed after his death, but it would be worth researching to see if that could be avoided if the residuary went to a sole benefit trust for the son. I think he needs to give up on the idea of providing for others.

  October 23, 2024 at 11:42 am #34969
  Richard Winblad

  See:
  SI 01150.121 Exceptions — Transfers to a Trust
  A. Policy — Exception for transfers to a trust
  The period of ineligibility for transferring a resource at less than fair market value does not apply to an individual in the following situations.

  1. The Trust is a Countable Resource
  The period of ineligibility does not apply to an individual who transfers resources to a trust if either of the following is true:

  •
  the portion of the trust attributable to the transferred resources is a countable resource of the individual (i.e., the trust is countable as a resource for purposes of determining SSI eligibility). (See SI 01120.200.)

  •
  the trust would be considered a countable resource but for the undue hardship provision applicable to trusts.

  2. Transfers to a Trust for Disabled or Blind Child
  The period of ineligibility does not apply to an individual who transfers a resource to a trust established for the sole benefit of the individual’s child of any age who is blind or disabled. This includes trusts qualifying as “Medicaid trust exceptions” in SI 01120.200 ff. (i.e., trusts established under Section 1917(d)(4)(A) and (C) of the Social Security Act).

  ________________________

  This post is not legal, tax or investment advice. Reading or responding to this post does not create an attorney/client relationship.

  October 23, 2024 at 12:22 pm #34972
  douglas koenig

  So, the last comment by Richard is suggesting that Annette’s idea would be workable?
  A self funded SNT for himself, with beneficiary designations to his son in another SNT, (and to other family members, perhaps)

  October 23, 2024 at 12:46 pm #34973
  Victoria Camerati

  What state is your client in?

  December 3, 2024 at 10:23 am #35124
  Melissa Crump

  I second Victoria’s question, states have different qualifiers that will change the strategy used. My state can use strategies discussed by Cynthia.

  December 3, 2024 at 1:48 pm #35125
  Jolyn Wilkins

  I have the same question as Douglas. A self-funded SNT for himself with beneficiary designations to his son in another SNT, (and to other family members, perhaps)??

  December 5, 2024 at 11:11 am #35129
  Stephanie Strickland

  all excellent feedback!