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If you or a loved one may need long-term care in the future, you’ve probably heard about Medicaid—and possibly Medicaid estate recovery. After a Medicaid recipient dies, the state may seek to recover care costs from their estate.
The good news is that there are legal tools that may help protect your property. One of those tools is a trust, but not just any trust will do. Here, we’ll take a closer look at how trusts work and when they may protect your assets from Medicaid recovery.
What Is Medicaid Estate Recovery?
Medicaid estate recovery is a process where the state seeks to recoup certain costs paid on behalf of a Medicaid recipient. In Louisiana, this typically applies when someone received Medicaid benefits for long-term care services, like a nursing home or home-based care, and later passes away.
After the person dies, the Louisiana Department of Health can file a claim against their estate to recover the costs incurred for their care. That might include:
- A primary residence
- Cars
- Bank accounts
- Other property held in the deceased person’s name
Estate recovery usually happens during the succession process. If there’s no plan in place, heirs could find themselves facing the unexpected loss of family property.
Can a Trust Shield Assets From Medicaid Recovery?
In certain cases, a trust can help protect assets from Medicaid recovery. However, it depends on how the trust is set up.
Not all trusts work the same way. If the trust allows the person applying for Medicaid to retain control or benefit from the assets, those assets may still be considered available to the state. On the other hand, if the trust is structured correctly and established far enough in advance, it can help preserve property for your family.
It’s not enough to simply “put the house in a trust.” The details matter. That’s why timing, control, and compliance with Medicaid rules all play a part.
Revocable vs. Irrevocable Trusts in Louisiana
Not all trusts provide protection from Medicaid recovery. In Louisiana, the type of trust makes a big difference.
Revocable Trusts
These are flexible and commonly used in estate plans. You can change or cancel them at any time. But because you still control the assets, the state treats them as part of your estate. As a result, they’re subject to Medicaid recovery and typically won’t protect your home or savings.
Irrevocable Trusts
Once you create an irrevocable trust, you give up direct control of the property inside it. You can’t just take it back or change the terms. Because of this, the state may no longer consider the assets in the trust as part of your estate, assuming the trust is created and funded well in advance of applying for Medicaid.
One common tool is a Medicaid Asset Protection Trust (MAPT). This type of irrevocable trust is designed specifically to protect your home and savings from Medicaid recovery. With a MAPT:
- You can still live in your home
- You may still receive income from trust assets, depending on how the trust is drafted
- Your heirs can receive the assets after your death, without the state making a claim
MAPTs must be carefully drafted to comply with Louisiana law and Medicaid rules. If created properly and early enough, they can be a strong tool for preserving what you’ve built.
When Is the Right Time to Plan?
Ideally, Medicaid planning should begin long before care is needed. Many people wait until health declines or a nursing home stay is imminent, but that can limit your options.
In Louisiana, the state uses a five-year “look-back” period. That means if you transfer assets to an irrevocable trust within five years of applying for Medicaid, those transfers could lead to a period of ineligibility.
Early planning gives you more options. Even if care is already needed, legal strategies may still be available.
Other Tools for Protecting Your Assets
Trusts can be powerful, but they aren’t the only way to protect what you own. Depending on your situation, other strategies may help reduce the risk of Medicaid recovery:
- Usufruct: This lifetime right lets you use or live in property even after transferring ownership, which may limit Medicaid’s ability to make a claim.
- Life estate deed: Allows you to remain in your home while preserving it for your heirs.
- Estate planning updates: Keeping your will, beneficiary designations, and account titles up to date can help keep your plan aligned with your goals and reduce exposure to recovery.
Each of these tools works differently, and not every option is right for every family. We can help you understand what fits best for your needs.
How We Can Help
At Kallio Law Firm, LLC, we help Louisiana families protect what matters most. Whether you’re caring for an aging parent or planning for your own future, we’ll explain your options clearly and craft a Medicaid plan that fits. We draft Medicaid-safe trusts, advise on estate recovery risks, and put protections in place to help preserve your home, savings, and peace of mind.
Start the Conversation About Long-Term Care
The earlier you plan, the more options you’ll have. If you’re concerned about long-term care costs, we’re here to help. Contact Kallio Law Firm, LLC to take the next step.
