Yes, but we generally do not look to special needs trusts as a way to protect money for heirs.
As a full time elder law attorney, I get a lot of questions on how to protect assets from the nursing home. Normally the conversation goes something like this:
My Mom is in the nursing home. She has $100,000 in the bank. Isn't there some type of special needs trust we can place her money into to protect it from the nursing home?
The basic answer to this question is no, with a caveat.
The first rule for Medicaid/asset protection planning is that we cannot give money away within the 5 year lookback period, although this has exceptions in Florida. One exception to the gifting is giving money to a special needs trust. But there are only two types of special needs trust in this situation where a transfer penalty does not apply:
- D(4)a Special Needs Trust - this is reserved for those under age 65
- Pooled Trust - this is allowed for someone over age 65
The big picture is that both of these trusts allow money to be placed into them and the transfers to the trust are not gifts for Medicaid purposes. BUT - there is a but, of course. The BUT here is that these trusts are generally known as "Pay Back" Trusts. A pay back trust means that if any funds are left over after the Medicaid recipient's death, the State of Florida gets paid back for any expenditures they spent to help the recipient before anyone else receives any money. This essentially means that special needs trusts are not asset protection devices for heirs.
If Special Needs Trusts do not work, what can be done to protect assets?
I have a lot more information on Medicaid and asset protection planning here:
The main thing you need in these situations are a good elder law attorney and a good durable power of attorney.
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