Irrevocable Trusts to Protect Assets
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In this newsletter we review how Irrevocable Living Trusts can be used to protect your life savings in the event you need long term care covered by Medicaid.
Basic Medicaid Rules
To understand how an Irrevocable Trust can protect your assets, it is helpful to first understand how Medicaid works.
Medicaid is a joint federal and state health insurance program that helps pay for long-term custodial care in a nursing home. Depending on the circumstances, it may also provide coverage for home care services and certain assisted living programs.
To qualify for Medicaid, you must meet strict financial eligibility requirements.
In addition, if you transfer assets within five years before applying for Nursing Home Medicaid, Medicaid may impose a period of ineligibility during which it will not pay for your care. This is known as the five-year lookback period.
New York also plans to implement a lookback period for certain Community Medicaid (home care) applications.
As a result, many individuals are required to spend a significant portion of their savings before they qualify for Medicaid benefits.
For example, in New York, the 2026 Medicaid resource limit for a single individual is $32,532. Assets above that amount may have to be spent before Medicaid benefits become available. Depending on your circumstances, this could include cash, investment accounts, certificates of deposit, certain life insurance policies, vacation property, and, in some cases, even your home.
Using an Irrevocable Trust to Protect Assets
An Irrevocable Trust is one of the most effective estate planning tools available to protect your assets from the cost of long-term care.
To provide that protection, the Trust must be carefully drafted to comply with both federal and New York Medicaid laws.
The Trust is created through a written agreement between you (the Grantor) and the Trustee you appoint to manage the Trust assets.
Because every family’s circumstances are different, the Trust should be customized to meet your specific goals and planning needs.
In addition to protecting assets, an Irrevocable Trust allows those assets to pass directly to your beneficiaries upon your death without the delays, expense, and publicity associated with probate.
Why the Trust Language Matters
The protections provided by an Irrevocable Trust depend largely on how the Trust is written.
Under Medicaid rules, assets that you have the unrestricted right to withdraw or reclaim are generally considered available to you and are therefore not protected.
For this reason, the provisions of the Trust Agreement must be carefully drafted to satisfy Medicaid’s requirements while still giving you as much flexibility as possible.
Proper drafting can make the difference between a Trust that protects your assets and one that does not.
To learn more about Trust planning, please visit our website by clicking here.
The Medicaid Five-Year Lookback
Transfers to an Irrevocable Trust are generally subject to Medicaid’s five-year lookback period for Nursing Home Medicaid.
This means that if you transfer assets to the Trust and apply for Nursing Home Medicaid within five years of the transfer, Medicaid may impose a penalty period during which it will not pay for your nursing home care.
Once the five-year lookback period has passed, however, the transferred assets are generally no longer counted for Medicaid eligibility purposes.
Next Newsletter
The next newsletter in this series will explain the transfer rules in more detail.
How We Can Help
The Koldin Law Center, P.C., located in East Syracuse, New York, has over 50 years of experience helping individuals and families navigate elder law, estate planning, and Medicaid planning.
Our practice is limited exclusively to Elder Law, including:
- Medicaid planning and applications
- Asset protection strategies
- Wills, Powers of Attorney, and Health Care Proxies
- Revocable and Irrevocable Trust planning
When we handle a Medicaid case, we do more than submit the application—we review strategies to protect assets both before and after Medicaid eligibility is established.
We offer no-fee initial consultations, and we welcome the participation of adult children, attorneys, accountants, and financial advisors.
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We all share the responsibility for making our family and friends aware of the planning options available to them.
Your referral to the Koldin Law Center could make a major difference in the lives of your family and friends if they are someday faced with a long term illness.
Remember that the Koldin Law Center offers many services for clients of all ages. Our services range from basic estate planning such as a simple will to complex estate planning including asset preservation planning.
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