If you have a loved one who has a serious medical condition or disability, you likely know how much medical care costs. Even worse, you probably realize obtaining private health insurance is virtually impossible. Fortunately, Medicaid is available to many low-income individuals.
Medicaid is a needs-based program. This means your loved one must have limited assets and income to qualify for Medicaid benefits. If you are thinking about leaving cash, property or other assets to your relative, you may worry about the effect your gift may have on her Medicaid eligibility.
Preserving Medicaid eligibility
While there are certainly exceptions, a financial gift may constitute income for Medicaid eligibility purposes. Therefore, even though your monetary contribution may provide short-term help to your loved one, it may also cause long-term harm. To preserve eligibility, you are likely better off not making a direct cash or in-kind gift. There is a workaround, though.
Establishing a supplemental needs trust
Medicaid provides health care benefits for low-income individuals. It does not, however, offer funds for supplemental expenses. These expenses, such as out-of-pocket medical care, can add up quickly. If you want to help your ill or disabled loved one, you may want to consider forming a supplemental needs trust. As its name indicates, this trust gives your loved one access to funds for supplemental expenses.
Keeping trust funds separate
The brilliance of a supplemental needs trust is that it keeps funds separate from your loved one’s qualifying assets. That is, ownership of the funds does not transfer to your relative. Accordingly, when determining eligibility for Medicaid, the funds do not appear as assets your loved one owns. The supplemental needs trustee can also verify that fund disbursements do not interfere with Medicaid.
By keeping trust funds separate, you protect your loved one’s Medicaid eligibility. Still, because a supplemental needs trust provides access to money that improves your relative’s quality of life, you can likely help her out without sabotaging Medicaid funds.