What type of trust is commonly used for Medicaid planning?

An irrevocable trust is commonly used for Medicaid planning because it effectively removes assets from an individual's ownership, which helps in qualifying for Medicaid benefits. When a person creates an irrevocable trust, they transfer assets into the trust and relinquish their control and ownership over those assets. This can protect those assets from being counted for Medicaid eligibility, as long as the transfer was made outside of the Medicaid look-back period, which is typically five years.

Unlike a revocable trust, where the grantor retains control over the assets and can modify or revoke the trust at any time, an irrevocable trust is permanent. This inability to change or dissolve the trust is what makes it a valuable tool for ensuring that assets do not impact eligibility for benefits like Medicaid.

Living trusts and testamentary trusts, while useful for estate planning, do not offer the same level of protection for Medicaid eligibility since assets in a living trust can typically be revoked or amended, maintaining the grantor’s ownership, and testamentary trusts only come into effect after death, rather than during the grantor's lifetime when Medicaid eligibility is being determined.