So my mother is going into assisted living. Can you put a pension and social security into a trust or do you have to leave them outside a trust? I was thinking maybe an Income trust but I really have no clue. I am hoping to get her the survivor benefit from the VA.
Andy
Most of the Medicaid Planning Iâve seen involves âasset preservationâ. You can pretty much assume that any current income like pensions, social security, etc. is going to go to the nursing home.
Thereâs also a âlook back periodâ involved in this. Any restructuring of how assets are titled to make Mom âMedicaid-readyâ probably needs to be done 5 years prior to the date she actually enters the nursing home.
Iâd talk to an attorney in your state that specializes in âMedicaid Planningâ.
intercst
Thanks Intercst, I am finding that the VA does not have a look back period. She is going to Seattle Washington so I am heading there to talk to a lawyer. But if someone knew if you can put a pension and / or social security into a trust that would be helpful.
Andy
Pensions and SS are income streams, not assets. As such, they generally cannot be put into a trust. It may be possible to direct the income stream into a trust, but you would have to ask the attorney. That said, whatever type of account itâs deposited into, itâs still income in her name. Which brings me to my second pointâŚ
Itâs my understanding that the VA survivor benefit for long term care is only supposed to cover the amount that is in excess of the survivorâs income. So, I would expect that the SS and pension income would have to be considered before any benefits would kick in. So trying to place the income into a trust to avoid paying it to the nursing home probably isnât going to work. She may be allowed to keep a small amount for personal expenses, but the majority of the income is probably going to go to the nursing home, even if she does qualify for the VA survivor benefit.
I will also point out that there are asset limits on claiming the VA survivor benefit, currently about $150k. The way that the VA counts âassetsâ they include the annual income. So if your Mom gets, say, $30k in SS, pensions and any other income, she would have to spend down to $120k in assets, including stocks, bonds, real estate, etc. but excluding equity in her personal residence.
AJ
A related question. Is assisted living deductible as a medical expense?
Thank you Aj that was very helpful and exactly what I needed. Now I have some great questions to give the lawyer.
Andy
The expenses that qualify as medical expenses are deductible. You generally need to ask for an itemized list of expenses. Things like nursing care, physical therapy, occupational therapy, management of medications, etc. would be deductible. Things like room and board would not be deductible.
Edited to add:
The actual deduction of medical expenses would be subject to the 7.5% of AGI floor, and then having total deductions that are in excess of the standard deduction. Under current law, that may be a high bar. Beginning in 2026, the bar would be lower, unless Congress changes the law. My gut feeling is that many people initially in assisted living are paying more for room and board type expenses vs medical expenses, so deductibility of their expenses may be limited. As they move up into higher levels of care being required, the expenses are more likely to be deductible.
AJ
1poormomâs insurance covered meds. The actual assisted living was deductible to some extent, if I understood the accountant correctly. He didnât really want to go into detail, likely because he realized if I knew how to do it, I wouldnât need him. A quick google says that, indeed, some of those expenses are deductible.
However, if there is a LTC policy, this is what that is for. 1poormom had LTC, and it was very helpful.
I would just caution, even if expenses are qualified medical expenses, if they are reimbursed some other way, like insurance, FSA or HSA, then they are not deductible. There is no double-dipping.
AJ