Contrary to popular belief, in many states, an elderly person entering a skilled nursing facility does not need to “spend-down” all assets in order to qualify for Medicaid benefits. Instead, the “spend-down” monies can be placed into a pooled special needs trust, such as Alabama Family Trust, and the elderly person can begin receiving Medicaid benefits if otherwise eligible.
A spouse or children can then use trust funds to provide things such as diapers, pajamas, clothes, a private room, caregivers in the nursing home, or pre-need funeral plans. Meanwhile, Medicaid begins paying for the monthly room and board at the facility.
Note: Disabled individuals over the age of 65, must use a pooled special needs trust such as Alabama Family Trust (check your state law). Both first-party trusts and third-party trusts may be created for the elderly person. Pooled trusts are addressed in 42. U.S.C. § 1396p(d)(4)(c).
Alabama Family Trust does not provide legal advice. You should consult with an attorney that is knowledgeable about special needs trusts. The following is provided only for general information purposes.
First-Party Special Needs Trusts
If an elderly person entering a skilled nursing facility has or receives assets over the Medicaid limits, the assets can prevent the person from qualifying financially for Medicaid benefits. However, if the assets are placed with Alabama Family Trust and the person is otherwise eligible for Medicaid benefits, Medicaid will begin paying for the monthly room and board at the nursing facility, and the trust funds can be used to provide things that the elderly person needs.
Since the trust assets are the assets of the elderly disabled person, this type of trust requires a Medicaid pay-back provision at the elderly person’s death, to the extent funds are still available in the trust.
Third-Party Special Needs Trusts
If a family member or friend wishes to give an elderly person money or leave the elderly person an inheritance, a third-party special needs trust should be created. The person creating the trust can leave directions in his or her Last Will and Testament or Living Trust to create a supplemental needs trust or a stand-alone trust, naming AFT as the preferred Trustee. The trust proceeds can be used over the elderly person’s lifetime to supplement his or her needs to improve the elderly person’s life as well as pre-need funeral plans. At the elderly person’s death, any remaining funds in the trust can be distributed to any person or entity the creator of the trust designates.