The cost of long-term care can quickly put pressure on the savings you worked hard to build for yourself and your family. Because each trust serves a different purpose under New Jersey Medicaid rules, the financial concern you need to address will help determine which one fits your plan.
Protecting assets with an irrevocable trust
An irrevocable trust can help keep property from counting toward Medicaid’s asset limit, but only when you give up access to the principal. If its terms allow the trustee to return any portion to you or use it for your benefit under any circumstances, Medicaid generally treats that amount as available.
If you fund the trust and apply for long-term care Medicaid within the next five years, New Jersey’s look-back period can result in a penalty that delays eligibility. The state uses the value of the transferred property to calculate how long those benefits remain unavailable.
A revocable living trust works differently because you can end it and take back what you placed inside. New Jersey therefore counts the entire principal as an available resource.
Managing excess income with a qualified income trust
This arrangement can help when your monthly income is too high for long-term care Medicaid. The state does not count the amount placed in the account when deciding financial eligibility, but you must still meet the program’s separate resource limit.
You can direct some or all of your Social Security, pension or other income to the account. For each source you choose, you must deposit the full monthly payment during the same month you receive it. Savings, investment funds and proceeds from selling property cannot go into this type of trust.
Drafting each trust to meet Medicaid requirements
The terms should reflect the problem the trust is meant to address. Protecting assets requires different funding and distribution rules from managing excess income, so every provision must serve the same purpose.
The document’s label does not decide how Medicaid treats it. State reviewers examine the trustee’s authority and any right to amend or end the arrangement before deciding whether the property remains available.
If a trust belongs in your strategy, an attorney can prepare the document, help you choose a trustee and explain how to fund it under New Jersey’s requirements. During the application, counsel can respond if the state agency questions its terms or supporting records.