Irrevocable Trust and Medicaid Rules

by Mike
(Kentucky )

Question:

Can I put an immediate annuity, IRAs and 401K in an irrevocable trust, receive payments from the trust and after the 60 month look back period not have this counted as income or as an asset? Would the irrevocable trust work with my son as the trustee or do I have to use a third party? Is there a way to shield social security payments?


Answer:

An income-only irrevocable trust can be used to shelter assets from being counted for Medicaid eligibility purposes. Once five years has passed from the date of a transfer into such a trust, it can no longer be counted. Since income continues to be available, the income will continue to be counted each month it is distributed to the grantor. Distributions from an annuity are considered income under the Medicaid rules.

A family member can certainly act as the trustee of an irrevocable trust. Whether that is a good idea for both practical or tax purposes is beyond the scope of this discussion, however.

Since Federal law prevents Social Security payments from being assigned, there is no way to transfer them into a trust. They will have to be applied to the nursing home bill after the individual is eligible for Medicaid.

You can read more about medicaid rules at my Elder Law Blog.