I am age 74. Can I create a special needs trust in my will to benefit my husband if he ever needs Medicaid assistance to pay for long-term care? If I do create such a trust, what happens to the funds during his lifetime if he never needs care or never needs financial assistance? Can the trustee distribute the trust funds to him before he decides to apply for Medicaid?
Yes, you can create a trust in your will for your husband’s benefit. If properly drafted, the trust won’t be counted as available to your husband in determining his eligibility for Medicaid, but the funds in the trust can still be distributed to him or used on his behalf. Someone other than your husband, however, would have to serve as trustee. Trusts created in wills are known as testamentary trusts and qualify for this safe harbor. In contrast, if you were to create a trust for your husband during your life, the funds would not be protected, even if you were to fund the trust through your will. Only testamentary trusts receive this protection. As we often counsel our clients, don’t look for logic in the Medicaid rules.
For more information on Medicaid and trusts, go here: https://www.elderlawanswers.com/medicaid-and-trusts-12004.