I’m wondering does anyone here use these vehicles? Or is it just for the uber-wealthy? I suspect I can’t do them (especially the second one since I’m less than 5 years from Medicare). Or maybe this is better under a “retire early” category, or an “estate planning” category?
Qualified income trust (if you need an allowance). From what I’ve learned thus far, you put everything into a trust, assign a trustee that isn’t you, and that trustee can issue you a regular allowance. Makes it look like you have no assets (ideal for ACA qualification). But the money isn’t yours, at least not precisely. You don’t control it, as I understand it.
Medicaid asset protection trusts (5 yr look back). I’m a little less clear on this one, but I didn’t dig too deeply since it has a 5 yr look back, and I only retired 3 years ago (and I’m less than 3 years from Medicare). I just include it for discussion, in case someone else may be able to benefit from it.
The only trust I have is one set up by my will that holds assets for my kids if I should die before they reach age 25.
That said, I think you may be conflating Medicare with Medicaid when talking about the Medicaid trust. The typical use of a Medicaid trust is to protect assets from being sold to cover Medicaid covered costs such as extended nursing home care for seniors who can’t pay the bill on their own.
When Medicaid steps in to cover costs like that, it expects you and your spouse to spend down your assets to cover the care first, down to some allowable limit. It looks back 5 years at any assets you may have given away to your kids or other loved ones and claims those assets are really yours and thus should be spent on your care. By putting those assets in a qualifying trust at least 5 years in advance of tapping Medicaid, Medicaid won’t see them as yours.
I believe some part of this to be in Federal Government requirements. Additionally the individual states can (an many do) have state specific limits, rules, look back periods, etc.
Usually the Medicaid issue is about getting Medicaid to pay for nursing home care. Nursing home costs can deplete assets needed to support surviving spouse. Attorneys specializing in elder care know the laws in your area and how to address this problem. If you anticipate needing nursing home care consulting an attorney can be a good move.
Trusts can be used for many situations. Most common is privacy, to keep records out of your courthouse and avoid probate which can be expensive some places. Also to provide for children from a previous marriage. If you cross estate tax limits then they can reduce estate taxes. Many different aspects. Providing for special needs children. Providing for care of pets. Etc.
How much do you trust the trustee? Will it end up costing you more, between fees and opportunity costs to hire the trustee than it would have cost you in taxes and ACA fees?
I will also point out that if you have ‘no’ income, you may qualify for Medicaid, rather than ACA.
Medicaid asset trusts have little to do with when you qualify for Medicare, and everything to do with whether you/and or your spouse (if appropriate) need long-term care, whether or not you qualify for Medicare. (Medicare generally will not pay for long-term care, other than paying for rehab care after surgery/other procedures.) The 5 year lookback is concerned with money that you gave away during those 5 years, not money that you placed in a qualified Medicaid asset trust during that timeframe.