Frazer Ryan Goldberg & Arnold LLP

Wealth Planning

Estate Planning

Tax Planning

Wills and Trusts

Pensions and Benefits

Tax Controversy

Income Tax

State and Local Tax

Employment Tax

Property Tax

Business Law

Business Planning

Transactions and M&A

Real Estate Law

Commercial Litigation

Estate Controversy

Inheritance Disputes

Contested Probate

Trust Litigation

Contested Guardianship

Estate Administration

Probate

Trust Administration

Guardianship

Conservatorship

Legal Protection

Elder Law

Mental Health Law

Long-Term Care

Special Needs

 

Attorneys

About Us

Videos

Contact Us

Home

 

602-277-2010

Twitter

Google Plus

Facebook

Are Irrevocable Living Trusts Useful in Qualifying for ALTCS?

Some irrevocable trusts are allowed to own assets transferred by an individual, where the individual is also a beneficiary, but will not subject the individual to a transfer penalty and the assets will not be counted as available resources.

More: Frazer Ryan's Long-Term Care Legal Services

Individuals who have resources in excess of the allowable Arizona Long Term Care System limits have limited options when it comes to qualifying for ALTCS (see current eligibility limits and requirements).

Many people are under the mistaken belief that a transfer of an asset to a revocable or living trust will help the individual qualify for ALTCS. However, because the individual still controls the asset in a revocable trust, assets held in a revocable trust are treated as still being owned by the individual for purposes of ALTCS eligibility.

ALTCS QUALIFYING TRUSTS

Prior to August 10, 1993, the law did allow individuals to create what were referred to as “Medicaid Qualifying Trusts.” These were irrevocable trusts created by the individual and funded with the individual’s assets, which, in some cases, could be protected from consideration by ALTCS.

The basic rule for irrevocable trusts created after August 10, 1993, is that any asset in an irrevocable trust that can be distributed to the beneficiary at the discretion of the trustee is treated as a countable resource.

Some irrevocable trusts contain assets of the individual and a spouse along with resources that belong to other individuals. In these situations, ALTCS will determine the individual’s proportionate share. Any distribution that is not made to others that is not for the benefit of the individual will be considered to be a transfer of resources, and a penalty period will be imposed.

To the extent the trust does not allow for any distribution to the beneficiary, it will be treated as a transfer of resources subject to a transfer penalty. If it has been more than 60 months since the Trust was created, then no penalty will be applied.

SPECIAL PURPOSE TRUSTS

Some irrevocable trusts are allowed to own assets transferred by an individual, where the individual is also a beneficiary, but will not subject the individual to a transfer penalty and the assets will not be counted as available resources. These are referred to as “special purpose trusts.” Federal law has created these special trusts that are allowed to hold assets transferred by the individual ALTCS beneficiary, distributed according to specific rules established by statute, yet the value of those assets will not be considered when determining eligibility for ALTCS. These three special purpose trusts are:

  • “First-Party Special Needs Trusts,” established by an individual under the age of 65

  • “Pooled Trusts,” administered by a non-profit organization for the benefit of the individual

  • “Income Trusts,” designed to administer the income of an ALTCS beneficiary who may have more income than allowed by the State of Arizona

Legal Guidance

As you can see, ALTCS eligibility is complicated and advice from an attorney who frequently works in this area of the law is highly recommended. At Frazer Ryan, we work hard to say up to date on the law and on methods to ensure that all eligible individuals are properly prepared to qualify for ALTCS.  We encourage you to give us a call to discuss your particular situation with us.