Q. My dad needed nursing home care in New Jersey. To receive assistance from Medicaid, the trustee of my dad’s revocable trust had to create an irrevocable trust, an OBRA ‘93, which the Medicaid lawyers told the trustee to create. I am disabled and the language said I could remain in my parents house. However, being on SSI, I couldn’t pay the property taxes or upkeep of the house. The trustee had to sell the house to avoid a sheriff’s sale, and the money was placed in the trust. Can Medicaid recover all the trust money from the sale of the house if I’m disabled and on SSI?
— Unsure
A. As you know, Medicaid and how it treats assets can be complicated.
And one move or strategy can affect eligibility for benefits.
You mentioned OBRA 1993, which is the federal Omnibus Budget Reconciliation Act of 1993.
Among other things, it authorized the creation of self-settled special needs trusts, said Shirley Whitenack, an estate planning attorney with Schenck, Price, Smith & King in Florham Park.
“Pursuant to another federal law, individuals can transfer their assets to a self-settled special needs trust for the benefit of a disabled child so that the individual can qualify for Medicaid benefits,” she said. “There is no lookback or transfer penalty when the assets are transferred to a properly drafted self-settled special needs trust.”
Whitenack said federal and state law require the self-settled special needs trust to provide that when the trust is terminated, either upon the death of the disabled beneficiary or terminated earlier than the death of the beneficiary, the state must be paid back dollar-for-dollar for all expenditures made by Medicaid on behalf of the disabled beneficiary from the assets remaining in the trust.
“Medicaid is not entitled to receive the proceeds of the sale of the house that was deposited into the trust until the death of the beneficiary or until the trust is terminated before the beneficiary’s death,” she said.
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Karin Price Mueller writes the Bamboozled column for NJ Advance Media and is the founder of NJMoneyHelp.com. Follow NJMoneyHelp on Twitter @NJMoneyHelp. Find NJMoneyHelp on Facebook. Sign up for NJMoneyHelp.com’s weekly e-newsletter.