What Is a Medicaid Trust?
A Medicaid trust or supplemental needs trust is a legal entity established for individuals who qualify for Medicaid but receive income that is over the limit allowed by the Medicaid program. If a person receives income over the Medicaid program limit amount, Medicaid benefits can terminate. The purpose of the Medicaid trust is to ensure that disqualification for benefits does not occur for a person who has too much income.
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Medicaid Trust Setup
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The setup of a Medicaid trust involves creating a legal trust agreement and appointing a person or entity that will serve as trustee. The trustee has a fiduciary duty to ensure that funds in the Medicaid trust are properly accounted. Any income deposited into the Medicaid trust does not count toward the Medicaid program income limit, which only counts funds outside the trust. A person may continue to receive benefits under Medicaid as long as funds outside the trust do not exceed program limits and may also receive funds from the trust for personal need items.
Common Use
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Medicaid trusts are a common option for people who do not receive much income, but receive enough to put them over the Medicaid program limit. Individuals in nursing homes are a good example, in that a widow may receive a pension from a deceased spouse that will not pay the nursing home expenses, but the pension is too much income to qualify for Medicaid.
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Disposition at Death
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Any funds still in the Medicaid trust at the death of the individual revert to the state that administered the Medicaid funds up to the limit of funds paid out for care of the individual. For example, if Medicaid paid $100,000 toward a person's care and the Medicaid trust contained $105,000 upon death of the person, $100,000 goes to the state and the remaining $5,000 pays as directed by the last will and testatment or the trust terms.
Seek Professional Help
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Even though establishment of Medicaid trusts occurs at the federal level under the United States Code, the setup of Medicaid trusts varies by state, since Medicaid is a state-run program. Because Medicaid trusts are complicated and administered under very specific rules, it is always prudent to seek professional legal advice from an attorney who specializes in this area.
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