Ask the Expert: Medicaid asset claim

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Lynn Brenner Lynn Brenner

Brenner answers questions about all aspects of family finance. ...

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My late father's will created a supplemental needs trust for my mother's benefit. The family house and a $100,000 money market account went into the trust in 2005. Mom is now almost 94, living at home with a live-in health aide. Now the trust is running out of money. We'd like to apply for Medicaid to keep her at home with an aide. After she dies, can Medicaid put a lien on the house?

 

No. For several reasons, Medicaid has no claim on the house.

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A special-needs trust is designed to provide money for its beneficiary without disqualifying her for Medicaid. When this type of trust is funded with its beneficiary's assets, it's called a first-party or "payback" trust: After her death, any remaining trust assets must reimburse Medicaid, says Jennifer Cona, a Melville elder-law attorney. But Medicaid has no claim on a third-party trust -- i.e., one funded by somebody else. This trust was funded by your father.

True, at his death, state law entitled your mother to one-third of his assets; so if he left them all to the trust, one-third of what went into it might be considered an asset transfer by your mother. But since the trust was funded in 2005, any such transfer was made more than five years ago and therefore wouldn't affect her current eligibility for Medicaid nursing home benefits.

And as it is, you'll be applying for Medicaid at-home care, which doesn't involve a look back at asset transfers made within the past five years. "For at-home benefits, Medicaid will ask to see three months of bank statements and the trust holding the deed," Cona says.

The bottom line Medicaid can't claim assets you transferred to a trust more than five years before applying for nursing home benefits.

Websites with more information bit.ly/MZo7L2 and bit.ly/MiswTu

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