Diane’s 90 year old mother had just entered a nursing home from the hospital. She was still on Medicare but that coverage would stop in 2 weeks. Diane called because she knew she would need Medicaid.
“Mom has only about $30,000 in assets”, Diane told me. “But she has a trust with about $60,000 in it.” At one point, Diane called it a “living trust” but then described it as irrevocable. She called because she wanted reassurance that the assets in the trust are exempt from Medicaid.
I explained that just because the trust is irrevocable doesn’t by itself tell me whether it is subject to New Jersey’s Medicaid spend down requirements or not. And her reference to a living trust confused things even more because most people use that term to refer to a revocable trust. Assets in a revocable trust definitely are subject to Medicaid’s spend down requirements and assets in an irrevocable trust may or may not, depending on what access Mom has to it. The only way to know would be for me to get a copy of the trust agreement and read it. There is no such thing as a “standard” irrevocable trust.
That’s when Diane made a statement that reveals a big mistake people make when it comes to Medicaid. She said, “I’ll file the Medicaid application myself and if I get denied then I’ll come back to you.”
That’s a big mistake which will almost always cause a really bad result. If it turns out that the assets in the trust are countable then what’s the harm, you say? Diane will have to take those assets and spend them down anyway. Next week I’ll tell you why that is such a huge fallacy.