Purpose of a Medicaid Trust
Eligible patients requesting Medicaid assistance for long-term care have to jump through some financial hoops to receive the funds. Medicaid requires patients to pare down income and assets until below the maximum guidelines for the state. An adult in California in 2014, for example, is not allowed to earn over $1,293 per month to qualify for Medicaid. Those earning more than the maximum income can stash the excess in a Medicaid trust, or qualified income trust. The trust holds the money for future medical bills or Medicaid repayment.
Medicaid Trust Setup
The local Medicaid office should have the necessary documents to be completed for establishing a trust. Patients who prefer to establish the trust independently can do so through a lawyer, but the trust documents still need to go on file at the Medicaid office. The trust paperwork names a trustee or executor of the account and establishes a bank account as the actual trust. The Medicaid trust should be set up as a checking account that receives automatic monthly deposits equaling the excess income.
Operating a Medicaid Trust
The trustee named in the documents has control over writing checks and making withdrawals from the account. Money can only come out of the Medicaid trust if it is going toward the cost of medical care at the nursing home or the home health service. The state can permit small amounts to be withdrawn for a personal or spousal allowance or to pay bank fees. Medicaid closely monitors the account to ensure deposits happen on schedule and spending happens for approved reasons. The trustee should immediately report to Medicaid if an error occurs with the account to receive guidance on how to proceed.
State Receives Trust After Death
If a patient stops requiring the medical assistance or dies, the trust money goes to the state up to the amount that Medicaid spent on that medical assistance. The local Medicaid office should have the paperwork necessary for turning the trust over to the state; a caseworker can help facilitate the process. Remaining funds can revert back to the patient, if living, or go to the beneficiary.