Can I sell my home if I put it in an Irrevocable Medicaid Asset Protection Trust?
The answer is most likely, yes. If you already have a trust, the first step is to consult with your elder law attorney and confirm that both the trust rules and your local state’s Medicaid rules.
The trust should be drafted to allow the trustee to buy and sell or otherwise exchange assets. Which means that the trustee could sell your home, but the sale proceeds would be placed directly into a trust account, and would not go to you, the Grantor. The trust could then use the proceeds to buy another residence for you to live in. This allows you to fund your trust with a property, allow the clock to start ticking so that you can get past a “look-back period” even if you decide to move later on. By following the rules accurately, you will not restart the clock, and the value of your home that you originally funded your trust with will be protected from the cost of nursing home care once five years have passed from the time of the transfer.
Here is an example:
- In January 2020 you created a Medicaid Asset Protection Trust and fund your home worth $900,000 into the trust.
- In March 2022, the trustee sells your home and the trust receives net proceeds of $1,000,000. The net proceeds are placed directly into a trust account.
- In April 2022, the trustee buys a condo for $400,000 using the trust account funds. The trust allows you (and your spouse) to live in the condo.
- The balance of $600,000 remains in the trust account, which can be invested, or preserved as the trustee sees fit.
Remember, the trust funds cannot be used for you, the Grantor, or your spouse, so you cannot use the house sale proceeds for rent or an assisted living if you sell your house. If the trust is drafted to allow you to receive income, then the money can be invested and you can use the income generated by the investment for your expenses.
If you need a nursing home anytime after February 2025, the Medicaid application will review any transfers you made back to February 2020. The initial transfer of your home in January 2020 will not be part of the lookback. The subsequent purchase of the condo and balance of trust funds will be protected because those were transactions done within the trust.
Asset protection planning for Medicaid long term care can be tricky and it is always best to consult with an elder law attorney not only to set up your plan, but before any significant changes take place. The right advice received before making a move will result in successful protection of your assets while accessing care when you need it.
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