If your parents are elderly United Kingdom residents and you fear that you may one day have to make the painful decision to move them out of their home and into an assisted living facility or nursing home, you should begin planning for this eventuality as soon as possible. Since your parents likely are not wealthy enough to afford the extraordinary costs of assisted living or nursing home care, applying for Medicaid may be their only option.
Medicaid is the joint federal and state program that pays for the care your parents will one day need, but there is a catch. Your parents must be “indigent” in order to qualify for Medicaid. What this means is that neither of them must own more than $2,000 worth of assets. Despite the fact that they are not wealthy, however, they probably have more than $4,000 worth of combined assets. What can they do? The answer, as reported by US News, may be a Medicaid spend-down.
Look-back period
Although a Medicaid spend-down is perfectly legal, you must help your parents do it well before the time they need to apply for Medicaid. The Deficit Reduction Act of 2005 gives the government a five-year look-back period from the date your parents apply for Medicaid benefits. Consequently, Medicaid personnel will look closely at whatever gifts, property transfers, etc. your parents made during the preceding five years. If they think these gifts and transfers were a deliberate attempt to become impoverished, they will disqualify your parents from receiving the Medicaid assistance they now need.
Irrevocable trust
Setting up an irrevocable trust is your parents’ best way of “impoverishing” themselves for Medicaid purposes while still retaining the benefits of whatever assets they own, such as their home. They simply place all of their assets into this trust. At that point, they no longer actually own their assets. Rather, the trust owns them and their appointed trustee controls the manner in which the assets are used and/or disbursed.
Naturally your parents will want to appoint a trustee, such as you or one of your siblings, who they thoroughly trust. After all, they will rely on their trustee for the rest of their lives to properly manage the trust assets and use them for their benefit and/or those of their other designated beneficiaries.
This is general information only and not intended to provide legal advice.
