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Law Educator, Esq.
Law Educator, Esq., Attorney
Category: Estate Law
Satisfied Customers: 112747
Experience:  Experienced in Trust and Succession Law, including Louisiana Laws
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I have a grandmother who has just been placed in the nursing

Customer Question

I have a grandmother who has just been placed in the nursing home. We've been encouraged to place her home in a irrevocable trust to prevent the state from seizing it to recover medicaid cost when she dies. Two questions:
- Will that prevent her assets from going through probate and the state putting a lien on the property?
- Will she have to pay a penalty because it is within 5 years? How is that paid?
Submitted: 10 months ago.
Category: Estate Law
Expert:  Law Educator, Esq. replied 10 months ago.
Thank you for your question. I look forward to working with you to provide you the information you are seeking for educational purposes only.
Yes, the irrevocable trust is the ultimate asset protection tool. It protects her assets from all creditors including medicaid and it also means that anything that is in the trust does not have to go through probate.
If the assets are moved within 5 years of her applying for benefits, the penalty is a 1 month loss of benefits for approximately every $6000 transferred. So the penalty is loss of benefits for that number of months (if the house is worth $60,000, then about 10 months loss of medicaid benefits is the penalty).
Customer: replied 10 months ago.
How do they collect the penalty fees?
Expert:  Law Educator, Esq. replied 10 months ago.
Thank you for your reply.
As I said above, they collect the penalty by suspending medicaid benefits for the number of months corresponding to the amount of assets moved. That means your grandmother has to pay for care for that number of months.
Customer: replied 10 months ago.
Last question: if she has no money (which she lives on a social security check of $900 and that is already given to the nursing home) - how does medicaid collect the penalties if the assets are in a irrevocable trust?
Expert:  Law Educator, Esq. replied 10 months ago.
Thank you for your reply.
Unfortunately, someone would have to pay the facility directly, medicaid does not actually "collect the penalty" they just will refuse to pay for her care for that number of months. I am afraid that is why people need to plan these things in advance of needing medicaid and many people fail to do so and when it gets to the point your grandmother is at, it is too late unless she can afford to pay for her care for the number of months medicaid will not pay because of the transfer.