If you are going to be qualified for Medicare as a senior citizen, you may feel as though Medicaid is not relevant to you. These are both government health insurance programs. You qualify for Medicare by earning retirement credits while you are working. Medicaid is available to those who can demonstrate financial need.
Medicaid is important for many senior citizens who qualified for Medicare because Medicare will not pay for long-term care. The majority of senior citizens will require living assistance at some point in time, so this is a serious matter.
Long-term care is very expensive, and most seniors can’t comfortably pay out-of-pocket while retaining something to leave behind to their loved ones.
Medicaid Spend Down
Many people must spend down their assets to qualify for Medicaid. There are various different ways that you can divest yourself of assets in advance of submitting your application for Medicaid coverage. You could live it up, or you could give your children their inheritances in advance. Another option would be the creation of a Medicaid trust.
There are different types of trusts. Some of them are revocable, and some of them are irrevocable. When you create a revocable trust, you don’t surrender control of the assets. You can revoke the trust at any time and it would no longer exist.
Because of the ongoing control, assets that have been conveyed into a revocable trust would be countable under Medicaid guidelines.
However, things are different with an irrevocable Medicaid trust. Because the trust is not revocable, you do lose direct control. Generally speaking, you cannot change the terms of the trust. Assets that have been placed into an irrevocable Medicaid trust would not be counted by the Medicaid program.
This can be a solution for many, but there are some disadvantages. There is a five-year Medicaid look back period. If you divest yourself of assets within five years of applying for the program, your eligibility is delayed until a penalty is served.
As a result, you must complete your spend down at least five years prior to applying for the program. If you place assets into an irrevocable Medicaid trust before you have any reason to believe that you have to apply for Medicaid, you are taking a risk because you are surrendering control. You may never need Medicaid.
You could create an income only Medicaid trust. You would receive income from the trust’s earnings, but the principal would not be countable. The drawback here is the fact that the earnings would go toward your long-term care costs if you did qualify for Medicaid at some point in time.
Medicaid Planning Consultation
Medicaid planning can be complex. If you would like to discuss things with a licensed elder law attorney, contact us through this website to schedule a free consultation.
Blaine Peterson
Attorney
Parman & Easterday
Since founding Parman & Easterday in 1985, Larry has led over 1,000 free, community-service education programs and helped more than 10,000 Oklahoma families go from putting off their estate plan to getting it done. His goal for every client is the same: to become the person their family calls "the one who took care of everything."
Larry is the author of three books: The Straight Shooter's Guide to Estate Planning; Estate Planning Basics; and Guiding Those Left Behind in Oklahoma. He served as Oklahoma's Secretary of State and Secretary of Commerce, and his firm is the only member of the American Academy of Estate Planning Attorneys in the state.
- Choosing the Right Successor Trustee: Key Considerations - October 8, 2026
- Aging in Place: A Medicaid Waiver Can Fill the Gap - October 6, 2026
- Does Every Estate Go Through Probate? - September 29, 2026
