Not so long ago, living trusts, also commonly referred to as revocable trusts or family trusts, were used as Medicaid planning tools for married couples in Ohio. A married would put their home in a living trust prior to a Medicaid application. As the home was in a trust and not in the names of the married couple, it was considered a countable resource. As such, it would increase the Community Spouse Resource Allowance (“CSRA”) by the value of the home, thereby allowing the community spouse to spend down excess resources by transferring the home into their individual names rather than spending the community spouse’s resources. It was a great way to boost the Community Spouses Resource Allowance, thereby helping the healthy spouse to keep more of his resources. Times have changed.
With the decision of Atkinson v. Ohio Department of Job and Family Services, the Living Trust turned from a planning tool to a liability for married couples facing the need for long term care. In Atkinson, a married couple had their home in a living trust. After one spouse moved into a nursing home and applied for Medicaid, the home was transferred to the institutionalized spouse and then to the healthy spouse. The Court found that the transfer out of the trust to the institutionalized spouse was not improper. However, the transfer from the institutionalized spouse to the healthy spouse was improper and the resulting penalty period of ineligibility was proper. The Court reasoned that if the transfer had occurred prior to the baseline date, that is the date that the institutionalized couple entered the nursing home, than the transfers would not have been improper. However, once the baseline date occurred, and the community spouse was given the benefit of the home in the CSRA calculation, the residence could not be transferred to the community spouse without a resulting penalty period.
A couple facing the need for long term care who have their residence in a living trust should consult a Cleveland Medicaid planning attorney before the unhealthy spouse enters the nursing home. Once the unhealthy spouse enters the nursing home, the ability to transfer the home to the healthy spouse may be lost. As with all estate planning and Medicaid planning situations, early planning is key to the best outcomes.