Trusts to Protect Your Assets from MassHealth
MassHealth can be both a blessing and a burden. For an eligible Massachusetts resident who needs long-term nursing care and lacks the resources to pay out of pocket, MassHealth coverage may be the solution that makes it possible to get that care. Considering long-term care in Massachusetts often costs upwards of $100,000 per year, many residents can’t afford it on their own. But not everyone meets the income requirements to qualify for MassHealth. An individual may have no more than $2,000 in countable assets, and there are strict rules about how applicants may dispose of assets in order to meet that limit. That’s why some residents looking ahead to their future medical needs, create trusts aiming to protect their earnings without sacrificing their eligibility status.
How Trusts May Help MassHealth Members
The asset limits imposed on MassHealth members may affect Massachusetts residents long before they need MassHealth services. The program’s five-year look-back period means that an individual’s assets need to be secured at least five years before applying for MassHealth benefits. An applicant who has given away significant assets within the previous five years may have their application denied.
To approve an applicant, MassHealth needs to see that the person doesn’t have the means to pay for his or her own services. If applicants do have assets in excess of the limits, those assets can’t be within the applicant’s control or MassHealth expects that they be used to pay for services. In some circumstances MassHealth may put a lien on a member’s house to ensure that, if the property is sold, MassHealth gets the proceeds to pay back at least a portion of the money spent on the member’s care. This could prevent a MassHealth member from being able to pass ownership of the family home to a relative. Because members must have few other assets to qualify for coverage, MassHealth’s efforts to recoup its costs could prevent some members from leaving any assets to their children and other loved ones.
Trusts are a tool that many people take advantage of in this situation. Creating the right type of trust may allow Massachusetts residents to control what happens to their assets without making those assets accessible to MassHealth or losing their coverage.
Trusts for MassHealth Planning
There’s no one-size-fits-all trust for MassHealth planning. The type of trust that best protects one person may leave another exposed to MassHealth estate recovery. Also, not all trusts are legally compliant for MassHealth planning. The program may reject an applicant’s request for coverage if it determines that the applicant has used a trust to improperly shield assets. MassHealth is in the business of controlling costs. To avoid a rejection, it’s advisable to work with experts who understand the legal complications around creating a MassHealth-compliant trust.
In some circumstances, creating a family trust is the best solution. It’s a type of trust that can be used to pass down assets along family lines. The grantor can establish terms that dictate assets are inherited by blood relatives. Say a grantor’s nephew is named as the beneficiary, but he predeceases the grantor – the assets would pass to the nephew’s child, not to his spouse. [Trust assets are passed down according to the trust terms, not necessarily blood lines. The grantor can dictate how assets are passed down, blood relative or not.]
There are trade-offs associated with establishing these types of trusts for MassHealth purposes. A key component of using a trust for MassHealth planning is that the trust be irrevocable. Assets held in such a trust are not considered part of an individual’s estate and are instead owned by the trust itself. By contrast, assets held in a revocable trust may still be within the control of the grantor, making them vulnerable to MassHealth. Irrevocable trusts can be inflexible and changing the terms isn’t always possible once they’re established.
That’s why it’s so important to understand your options and make careful choices around trust creation for MassHealth planning. The stakes are high, and failing to protect yourself could hurt your ability to afford long-term care and your ability to leave something for your loved ones.
Creating trusts for MassHealth planning is a big part of what we do at Ladimer Law. Our team can help you navigate your choices and put the plans in place that allow you to live out your remaining years in comfort and security. Are you looking ahead to your future long-term care needs? Contact Ladimer Law to get started.