No one likes to think about aging or needing assisted living services. However, the lifetime probability of becoming disabled in at least two activities of daily living or of being cognitively impaired is 68% for people age 65 and older. Therefore, many older adults seek some form of long-term care either through home-health services or nursing home facilities.
With this in mind, planning for long-term care seems like a very good idea, and talking to an experienced Massachusetts estate planning attorney can provide you with the information you need.
Massachusetts estate planning attorneys have expressed that long-term care affordability is among their clients’ top concerns. Specifically, how to balance personal wealth against qualifying for public aid. Irrevocable trusts offer a solution. Here’s what you should know about irrevocable trusts and MassHealth.
What Is MassHealth?
MassHealth, Medicaid in Massachusetts, is government-funded health insurance that supports long-term care. Strict income and asset regulations govern eligibility for MassHealth. Applicants with income or assets exceeding MassHealth guidelines will either need to spend down their wealth or restructure their estate to meet eligibility requirements. These rules apply to their income and assets and have a five-year look-back period. This means that your loved one’s bank statements, going back five years from the date of your application will be thoroughly examined.
It doesn’t take much to be disqualified for MassHealth, and the complexity of MassHealth’s eligibility rules can be difficult to deal with. Navigating MassHealth’s rules and requirements on your own can feel overwhelming. Consult a skilled Massachusetts estate planning lawyer to determine if you qualify for aid under MassHealth guidelines, and if not, what steps you might take to become eligible.
Why is MassHealth Important for Seniors?
Protecting Your Savings
Not planning for MassHealth means that unexpected events can hit much harder from a mental and financial point of view. If your loved one needs long-term assistance, you may have no other choice but to spend your savings on private care. Even a few months will turn extremely expensive, with the chance that it won’t be enough for their recovery.
Taking action before illness or injury is vital. If you don’t take action in time to consider the five-year look-back period, you may find yourself denied even if you begin taking action. The top benefit of MassHealth planning is the ability to protect your savings and assets.
Strategic Spend-Down Strategies
Taking preemptive action before applying means that you have the time necessary to think of effective spend-down strategies. For many people, avoiding a spend down is not possible, but with an attorney’s guidance on your estate plan, this step can be done in a way that will improve their quality of life by transferring countable assets into non-countable elements.
For example, annuities are a factor that will affect your MassHealth eligibility, but immediate annuities are contracts made with insurance companies that will pay you back with a fixed amount of money every month. This process is not treated as a transfer of assets if handled appropriately by an estate planning attorney.
Seniors Can Keep Their Home
MassHealth can place a lien on your senior’s primary residence, as the program typically takes profits from its sale in an attempt to recover costs from members. This can leave families in precarious positions, which is why taking precautions is important. You have multiple options when you want to protect your home.
A common option is using trusts that can’t be accessed by healthcare programs or directly gifting the home to a family member. A lawyer can help you make the best choice according to the circumstances and the amount of time you’ll stay away from home.
What if I Exceed MassHealth Income and Asset Requirements?
If your income and assets exceed MassHealth maximum requirements, you have a couple of options:
- Spend down your personal wealth to meet the income and asset requirements for public aid. A common way to do this is to spend money on medical care.
- Establish an irrevocable trust to shelter your assets and meet eligibility restrictions. An irrevocable Medicaid/MassHealth trust provides an opportunity to protect your estate while helping you qualify for MassHealth. However, the trust must be drafted appropriately to safeguard your assets against MassHealth.
Working with a qualified estate planning attorney to create your trust can reassure you that your assets are protected.
What Is an Irrevocable Trust?
An irrevocable trust is an estate planning tool that offers asset protection against taxes and creditors while also protecting your eligibility for certain government benefits.
Here’s a free tip that even ‘savvy’ estate planning clients are often unaware of: revocable or ‘living’ trusts do not offer any protection from long-term care costs!
Trusts can be an incredible planning tool, but not all trusts are created equal when it comes to MassHealth eligibility. In fact, revocable trusts—despite helping your estate avoid probate—still leave assets vulnerable if you or your spouse require nursing home care. Long-term care in Massachusetts can cost over $10,000 per month, and MassHealth won’t step in until your countable assets fall below $2,000. Assets in a living trust are still considered available resources under MassHealth guidelines.
But there is still hope. To fully protect your assets and home from long-term care costs, as well as creditors and probate, you need two things: (1) an irrevocable trust and (2) a five-year head start. Assets must be placed into an irrevocable trust at least five years prior to a MassHealth application in order to be fully protected. That means the time to plan is now!
The assets in an irrevocable trust are considered non-countable for purposes of qualifying for MassHealth benefits since:
- The trust is irrevocable. Once assets are transferred into trust ownership, they may not be removed or returned to the grantor.
- The terms of the trust agreement are permanent and may not be changed.
- The grantor assigns a trustee to oversee the trust, relinquishing management of the trust to the trustee.
- The trust must have been established and funded for five years before applying for MassHealth. This is due to the five-year-look-back period.
Why is timing so important? MassHealth imposes a five-year look-back period on asset transfers. If you give away or move assets into a trust during this window, you may be penalized or even denied coverage. Additionally, MassHealth may place a lien on your home to recover care costs, making it harder to pass property to your loved ones. The right irrevocable trust, set up well in advance, can protect these assets and ensure they’re preserved for future generations.
Call the Heritage Law Center for a free consultation on how using an irrevocable trust can protect you and your loved ones now and in the future. The time to act is before you face a crisis. Call us today.
What Is the Five-Year-Look-Back Rule for MassHealth?
It’s common for people to be denied MassHealth eligibility because they never considered the five-year-look-back period. To be eligible for MassHealth, you can’t exceed MassHealth asset or income limits. If you apply to MassHealth with assets or income over the limits, you’ll be required to spend down to the applicable limits. But you can’t intentionally just give away assets or sell them for less than fair market value in an attempt to be eligible for MassHealth.
In an effort to prevent MassHealth applicants from manipulating their income and assets to meet eligibility criteria, MassHealth reviews all transfers of assets made by an applicant 60 months before their application date. If they discover a transfer of assets during this period, whether to a trust or to another person, they’ll impose a disqualification period on the applicant’s eligibility (a length of time the applicant won’t be eligible for MassHealth).
The five-year-look-back rule underscores the importance of advance, comprehensive estate planning with an experienced Massachusetts estate planning attorney.
Contact the Legal Team at The Heritage Law Center About Irrevocable Trusts and MassHealth
Whether you have an existing estate plan or are considering one for the first time, it’s worth including some planning for long-term care. To learn more about incorporating long-term care provisions into your estate plan, contact our office today. When you do, you’ll be partnered with a knowledgeable Massachusetts estate planning attorney well-versed in irrevocable trusts and MassHealth.
After a thorough discussion and understanding of your financial assets, family dynamics, and estate planning objectives, we’ll develop a sound and comprehensive plan tailored to your needs.
Contact us today at info@maheritagelawcenter.com or call us at 617.299.6976.
