1. What type of client would be                imposed on the applicant.
interested in this type of Medicaid                                                             6. How is it set up?
planning?                                      4. What is a period of ineligibility?
                                                                                                Frankly it is not that complicated, if done
Actually, any client that is concerned         The government figures that if you could         correctly. The following are the steps:
about having medical costs financially         give your property away and then apply
devastate their family, and the assets the     for benefits, the taxpayer’s would be                The trust is created: The attorney
clients have accumulated over the years.       subsidizing the applicant’s family. In                drafts a properly designed irrevocable
                                               1993, a new rule came in that provides if             trust;
2. How does an Irrevocable Five Year           an applicant has made gifts, in Trust,               Parents contribute their property:
Look Back Trust work?                          within 5 years of applying for Medicaid,              The parents contribute their property to
                                               the value of the gifts will determine a               the trust and receive back income
First, let’s look at some of the Medicaid      period for which the applicant will be                interests for their joint lives. At the
rules that come into play here. Since we       ineligible. This period of ineligibility is           death of the survivor, the trust property
are using an irrevocable trust, to protect     based on: (i) the value of the gift, and (ii)         passes to their children or other heirs;
the clients, which we will discuss later, we   the average monthly cost of long term care           Wait 5 Years: Neither parent applies
need to discuss the “5 year look back”         in the applicant’s area. As an example,               for Medicaid benefits until 5 years have
rules under Medicaid. Let’s assume that        assume that the average monthly cost for              elapsed. Because there will have been
clients realize they are going to need long    one person is $3,500 per month. If an                 no gifts within 5 years of applying, there
term care in 6 months. It would be nice if     applicant gave away $300,000, the                     is no ineligibility and the property in the
they could simply give all of their property   government will divide the $300,000 by                trust is protected for the children or
to their children and then apply for           the $3,500 per month average cost, and the            other heirs.
Medicaid.                                      resulting figure, 86, is the number of               Who is the trustee of the trust: Good
                                               months of ineligibility caused by the gift.           question, generally, someone the parents
3. I don’t know many parents that              That totals 7 years of ineligibility for              trust to make sure that the assets are
would simply want to give property to          Medicaid benefits.                                    invested to provide the parents with
their children, do you?                                                                              income for their lives.
                                               5. What is the meaning of “5 Year                    What happens to the income when the
No, but let’s discuss that later, I need to    Look Back Trust” then?                                parents apply, after 5 years: The
point something out first. To prevent                                                                income will be spent on medical care
applicants for Medicaid from simply            Perfect question. If the applicant had made           until the death of the survivor, but the
giving everything away and then applying,      the gift more than 5 years, even one month,           corpus of the trust is safe.
Congress instituted the, in the case of        before applying, there is no gift within the 5
many trusts, “look back” rule. The look        year look back period, and the applicant will    7. That sounds like a good planning
back rule is a procedure whereby an            be covered. That brings us to the format of      technique, is it really that simple?
applicant for Medicaid is asked if they        the Irrevocable 5 Year Look Back Trust.
have made any gifts, in trust in this                                                           Yes, you will find that most of the sound
circumstance, within the last 5 years. If                                                       planning techniques have as few moving parts
so, there is a period of ineligibility
as possible. The Irrevocable 5 Year Look
Back Trust is a planning tool that many
parents should consider as a method to
maintain their income for life, yet protect
their children in the event that long term care   ESTATE PLANNING LIBRARY
becomes necessary
                                                     Number twenty-two

                                                    MEDICAID PLANNING
                                                        WITH THE
                                                  IRREVOCABLE FIVE YEAR
                                                     LOOK BACK TRUST

                                                         Compliments of

                                                     The Weidenfeld Law Firm
                                                       888 17th Street, N.W.
                                                            Suite 900
                                                      Washington, DC 20006

                                                        Tel: 202-785-2143
                                                        Fax: 202-452-8938

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