Could you benefit from an asset protection trust?

Could you benefit from an asset protection trust?

On Behalf of | Apr 3, 2020 | Firm News |

Depending on your goals, an asset protection trust could be an important part of your estate plan. This type of irrevocable trust allows you to qualify for Medicaid even if you have assets above the legal threshold.

Learn more about the rules for this type of trust in Pennsylvania.

Purpose of the trust

The state maintains a maximum asset threshold for Medicaid qualification when you become age-eligible. However, the assets you move into a Medicaid asset protection trust do not count toward this limit. The trust becomes the legal owner of the transferred funds, investments and property. You must establish a beneficiary other than yourself; otherwise, Pennsylvania will consider the funds available for health care payments and expensive long-term nursing home care.

Eligible assets

The trust can hold diverse assets, including:

  • Life insurance policies
  • Money market accounts
  • Mutual funds
  • Bonds
  • Stocks
  • Nonqualified annuities
  • Savings or checking accounts
  • Certificates of deposit
  • Real estate

Who can benefit from a Medicaid trust

The 2020 asset limit for nursing home care through Pennsylvania Medicaid is $2,000 per senior. However, you can claim $6,000 in exempt assets beyond this limit. Your primary residence is also exempt as long as you have less than $572,000 in equity.

You must also fall below the annual household income limits to qualify for nursing home care through Medicaid. For 2020, the limit is $16,612 for a single person and $22,491 for a two-person household.

When to create the trust

The state uses a five-year lookback period to access Medicaid eligibility, so you should fund this type of trust at least 60 months before you plan to retire and enroll. Keep in mind, however, that your plan will not pay for nursing care unless you and your doctor prove that this type of care is a medical necessity.

Consider seeking professional advice when you create any type of irrevocable trust. You cannot change this type of trust once you fund it with assets.


FindLaw Network