The prospect of long-term care raises difficult questions about the home and savings you have worked to build. If you are exploring Medicaid in Delaware, an irrevocable trust is one estate planning option to consider.
Trust terms and Medicaid eligibility
When you place your assets in a trust, Delaware Medicaid looks at whether they remain available to you. A revocable trust counts toward the resource limit because you retain the right to cancel it and reclaim the property. An irrevocable trust also counts to the extent its terms allow payments to you or for your benefit under any circumstances.
If the terms bar those payments entirely, the agency treats the affected portion as a transfer rather than an available resource. Your remaining countable assets must still fall within the limit before you qualify, but paying fair market value for care or goods Medicaid excludes reduces any excess.
Penalty periods for asset transfers
When you apply for long-term care coverage, Delaware Medicaid examines transfers for less than fair market value. The review reaches back 60 months, known as the look-back period. That includes funding an irrevocable trust to the extent its terms bar payments to you or for your benefit.
To set a penalty’s length in days, the agency divides the uncompensated value by Delaware’s average daily cost of nursing facility care for a private patient. The penalty begins no earlier than when you would otherwise qualify under an approved application and receive that level of care. Completing the transfer more than 60 months before you apply avoids the transfer penalty.
Limits on trust distributions
If any clause permits the trustee to pay principal to you or use it for your benefit, Delaware Medicaid counts the available portion as a resource. That applies whether the provision is mandatory or leaves the decision to the trustee. The agency examines what the document allows, even if no distribution occurs.
When an irrevocable trust directs its earnings to you, those payments count as income. That income treatment is separate from whether the trust principal counts as a resource.
Legal steps to fund the trust
The trust’s terms must satisfy both Delaware law and Medicaid eligibility rules, and you typically appoint someone else as trustee. You fund it by transferring the assets you choose to include. For a home, that means recording a new deed with the county recorder of deeds; for bank or brokerage accounts, it means retitling them in the trustee’s name for the trust.