Let’s pick up where we left off with Mary.  Her son, Jim is unemployed and Mary has been giving him funds totaling $50,000 over the last 6 months to help him pay his bills.  And she intends to continue doing so until he finds a job.  While Mary is 70, healthy and not thinking she’ll ever need long term care, I explained to her that if her health takes a turn, the transfers to Jim will make her ineligible for government benefits should she run out of money.  That is a very real possibility, with the cost of care currently averaging over $100,000 per year in her area.  So what can we do?

 We can set up a trust to which Mary transfers assets.  The trust then provides the funds to Jim.  Now, you may be thinking, “doesn’t this create the same problem Mary already has by giving Jim money each month or two?”   Yes, but by having Mary transfer the money in one lump sum Medicaid’s 5 year lookback is applied one time so we know when it will expire.  If she transfers a little bit at a time Mary creates a new 5 year lookback for each separate transfer.  But isn’t there a potential Medicaid penalty when the trust gives money to Jim?  No, because Medicaid only looks at Mary’s transfers, not the trust’s.

 Some may read this and conclude that this is just a way for Mary to avoid using her money for long term care and have the government pay her bills instead.  But is that really what is going on here?  Cleary not.  Mary isn’t even thinking about long term care (although she clearly needs to).  Through the use of a trust she can accomplish both goals, helping her son get back on his feet and providing for her own needs.  If she gets sick she’ll definitely need to use some of her funds for her own care but when she spends down completely, if done properly, she will be ready for Medicaid.  And that benefits not only Mary, but also the providers of her care who will receive those benefits, whether it be a nursing home, assisted living facility or home health care agency.

 The long term care provider will know that after Mary spends down her assets she will qualify for Medicaid without any surprise ineligibility periods imposed by Medicaid. And Mary will know that she can be there for her family and still meet her own needs.  Mission accomplished.