Medicaid, Medicaid Qualifying Income Trust, Special Needs Trusts, & Asset Protection Trusts

A trust may be the right answer for your situation, but the rules are specific. Learn about the types of trusts available and what they can do for you.

Medicaid, Medicaid Qualifying Income Trust, Special Needs Trusts, & Asset Protection Trusts

When an individual with limited or no income needs health care, they can seek out a federal program known as Medicaid to assist them. Medicaid comes with a number of strict income and asset limits, and can be tricky to negotiate when the individual isn’t well-versed in the rules that regulate income and assets. That’s why it is best to seek out an attorney who knows how to work with this system of rules and regulations.

An estate planning attorney who specializes in this area of concern is known as a Medical Planning Attorney. He or she can save those in need of Medicaid a great deal of problems and prevent disappointments and frustrations later on. AK Wills & Trusts regularly works with clients who need these services as well as others. Let’s dive into this subject a little deeper.

Alaska has two types of trusts that can protect and assist in Medicaid eligibility: Medicaid Income Trust and a Special Needs Trust.

Medicaid Income Trust

A Medicaid Income Trust is used when someone’s income is above Medicaid’s permitted threshold. It allows them to access Medicaid’s services and use the income that is above the threshold to cover medical costs that exceed Medicaid’s budget. Once a trust is established, the individual’s earnings are deposited and a monthly income limit is withdrawn. The surplus funds remain in the trust and are eventually used to reimburse Alaska for medical services provided.

A Medical Planning Attorney will help set up a trust and make sure that it is used to protect the interests of the client who needs access to Medicaid and other services. They will assist in creating spending limits so that the client is protected from losing their Medicaid due to misspending or overspending.

Special Needs Trust

In situations where an individual has too much property or too many assets, a special needs trust can be established. The trust is established to ensure that the property is used exclusively for the individual’s special needs.  These are special needs that Medicaid does not provide items or services for.

Two Kinds of Special Needs Trust

  • First Party Trust— entails the individual placing their own property in the special needs trust.
  • Third Party Trust—When an individual is gifted property or assets by a third party.

For example, if a grandparent were to leave a substantial inheritance to someone on Medicaid, it could cause an excess of assets. This can be a problem as it can make the individual ineligible for Medicaid services. The best way to navigate this legally is to establish a special needs trust with a third party to hold the gift or inheritance for the individual’s benefit.

It’s crucial that the special needs trust only cover expenses not covered by Medicaid as a failure to abide by the rules can mean being dropped by Medicaid and forced to repay the funds provided. This is why the expertise of a medical planning attorney who understands the laws and the needs of these clients is so important when setting up this kind of trust.

About Us

Our founder, Constance A. Aschenbrenner, has worked in Alaska since 1996 in different legal roles, including private, corporate, and state practice. In addition, she served as an assistant public defender. She created the Law Office of Constance A. Aschenbrenner in July, 2008. Serving the people of Alaska is her passion, and she finds fulfillment in helping them succeed.

Tap into the wealth of knowledge from an experienced Alaska Estate Planning Attorney. Our mission at the Law Office of Constance A. Aschenbrenner is to empower Alaska residents, one client at a time.

Contact The Law Office of Constance Aschenbrenner to talk to an experienced estate planning expert, or to schedule a free consultation.

Akwills- The Differences Between A Will And A Trust
Understanding the Vital Role of an Executor or Trustee
An Introduction to Special Needs Trusts


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by Connie Aschenbrenner


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