When a client needs Medicaid benefits to pay for their long term care needs, their elder law attorney likely has several strategies in their quiver to help get them qualified. One such strategy is using a sole benefit trust. What is this trust and when can it be used?

Medicaid has strict income and asset rules for those seeking long term care benefits. When a client has excess assets that they need to spend down to qualify for Medicaid, they can put those assets in a sole benefit trust. The benefit of doing so is that transfers to a sole benefit trust are not penalized. However, there are rules about who can be the beneficiary of the sole benefit trust.

The U.S. Department of Health & Human Services proffers that by the time your client reaches age 65, there’s an almost 70% chance that the client will need some type of long term care. This care could be in-home help or care at an assisted living or nursing home facility. Planning for the potential of needed care is a big part of elder law.

Medicaid is the only government program that will pay for long term care beyond 100 days for non-Veterans. In order to qualify for Medicaid benefits, your client will need to pass income and asset tests. In addition, state Medicaid programs have a 5-year look-back period (3 years in California). The Medicaid department will scrutinize any transfers that your client has made during the look-back period. If your client has transferred assets for less than fair market value during that time, your client will incur a penalty period and will not be able to receive Medicaid benefits right away.

Ellan Orkin died in 2019 at the age of ninety-nine. During her life, she and her sister served as nurses during World War II. After their service, they married and settled down in Delaware. Neither had children and each was predeceased by her husband. Ellan and her sister had many friends and other family members around them. Tina was Ellan’s cousin and lived across the street from her; they visited often.

In 1998, Ellan met Kimberly, a former teacher at a local community college. Kimberly presented business opportunities to Ellan and her sister and helped them with various daily needs. Over a span of about 25 years, ending in 2017, Ellan executed various changes to her estate planning documents that increasingly gave Kimberly greater shares of her estate.