Discretionary Support Trusts: Saving Your Assets from the Cost of Long-Term Healthcare

by Fredrick P. Niemann, Esq., a New Jersey Medicaid Attorney

When Medicaid determines whether or not you will qualify for assistance with your long-term healthcare, they will look at your financial assets. One way to protect your assets from Medicaid consideration and thus avoid paying for the cost of long-term care is to establish a qualifying trust.  Placing assets in an irrevocable trust that designates a beneficiary or someone who the assets will be given to on a future date is often recommended.  If certain requirements are met, Medicaid will not consider the assets in the trust in determining your ability to pay for your long-term healthcare.

In determining whether the assets in your trust qualify, Medicaid will look at the beneficiary(ies) of the trust and their interest. One common type of trust created is called a discretionary support trust. Discretionary support trusts, those in which a trustee is given the discretion to disperse principal from the trust to its beneficiaries.  Support trusts are closely scrutinized by Medicaid. The government looks to determine the beneficiary(ies) interest mainly by looking at 1) the number of beneficiaries and 2) whether the beneficiary(ies) receives public assistance during the trust creator’s lifetime.

 Trusts that involve multiple beneficiaries and where the beneficiaries do not presently receive public assistance have a better chance of qualifying for Medicaid, as the government will not consider the trust an available resource. Trusts with only one beneficiary who receives public assistance is usually deemed to be an available resource for the creator of the trust, therefore lessening the odds of qualifying for government assistance for health care. Additionally, where a trustee has the discretion to use the trust principal for comfort, welfare, and other basic needs of the life beneficiary, the government will view it as an available resource to pay for health-care, disqualifying the life beneficiary from Medicaid.

 New Jersey Courts have stated that assets of a discretionary support trust will NOT be considered an available resource (helping the person qualify for Medicaid) when “no payment could under any circumstances be compelled to the individual.” Therefore, it is important to establish in your trust that there are no payments to the life beneficiary required. It is also a good idea to have more than one beneficiary, to help show Medicaid that the trust isn’t being used simply to hide the assets from them.

 If you have any further questions regarding the discretionary support trust or Medicaid in general, please contact Fredrick P. Niemann, Esq. immediately. He can be reached at 855-376-5291 or by email at fniemann@hnlawfirm.com/. He would be more than happy to assist you.

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