Court Bonds

Too Much and Too Little? Medicaid Trusts



As confidence in the possibility of a real retirement falls, and the number of us living longer lives rises, there’s a real possibility that more of us will need public help in our later years. Estate planning experts point out that establishing a Medicaid Trust can be a very useful way to ensure we have care in the event we experience declines.


Don’t Be Overconfident

That’s the advice of estate planners for those of us who think relying on public support for our later in life care needs is completely out of the question. Soberingly, Perlman Law reminds us:


Of course, you may be able to handle all of your own day-to-day needs yourself. You might need only a little help from family members. Hopefully, this will be true. It is, however, impossible to envision how you will feel when you are in your 80s.The life expectancy for someone that is old enough to collect Social Security is into the mid-80s, so you should take the possibility quite seriously. According to the United States Department of Health and Human Services, 52 percent of Americans will need paid long-term care eventually.


Needing help–and being eligible for it—are two different things. Eligibility for Medicaid is ultimately determined by states, based on very restricted income requirements. As a result, many elderly people end up having “too many” resources to qualify, yet too few resources to actually pay for long-term care. This is where establishment of an irrevocable trust for the purposes of becoming Medicaid eligible can turn out to be life saving. The key, however, is that a trust must be set up well in advance of when care is actually needed, as  planning experts point out:


A Medicaid trust can provide a pathway to future eligibility. You can divest yourself of assets in an effort to qualify for Medicaid, but you are ineligible for five years after you transfer assets out of your name.If you fund an irrevocable trust with income-producing assets, you would be able to accept distributions as long as you are living independently. This is key for people that rely on the income that is generated by their savings.With the Medicaid estate recovery mandate in mind, you can transfer your home into the trust as well. This would not impact your ability to live in the home rent-free as usual. After five years have passed, the assets in the trust will not count if you apply for Medicaid.


Appointing A Trustee: Consider A Professional

When any type of trust is established, a trustee needs to be appointed to administer it. While it is typical to select a relative or friend,  there is no rule mandating this. Keep in mind that It is an option to designate a professional or institution as trustee, and sometimes doing so is a solid choice. A professional trustee can play a critical role in lifting some of the burdens and stress that tend to fall on loved ones, especially if they are juggling career and parenting duties. Grant Morris Dodds observes: “When an institution such as a bank or trust company acts in a fiduciary capacity, that institution is bound to act in the best interests of the beneficiary. Although such professional trustees charge fees, usually around 1% of the amount under management each year, the benefits of professional, independent, license, and bonded management are worth the costs.” The duties a professional trustee performs can vary based on the circumstances, and Trustee Pro offers these examples:


  • Supervise medical care, insurance benefits, and disability benefits
  • Provide record keeping and accounting services
  • Marshall all banks, brokerages and real estate properties in the trust name
  • Mediate family disputes and long standing grudges
  • Communicate to your beneficiaries on a regular basis regardless of legal duties to do so
  • Manage any and all creditors’ claims
  • Organize and handle all mortuary and cemetery arrangements
  • Manage real estate and rental properties


Ultimately, whether a friend, relation or professional is selected, a trustee has a fiduciary obligation to the beneficiaries—and must always exercise reasonable care and skill in managing the assets of the trust. Accordingly, a trustee bond may be required. A trustee bond is a specific type of fiduciary bond that protects the interests of the trust and its beneficiaries in accordance with applicable state law. As a leading national provider of many types of fiduciary bonds, Colonial Surety makes it easy and efficient to obtain a trustee bond. Just get a quote online, fill out the information, and enter a payment method. Print or e-file the bond from anywhere.


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Professional Trustee? Bonding Solution!

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