Can a trust help protect my assets if I ever need long-term care or Medicaid in the future? – North Carolina

Short Answer

Sometimes, but it depends on the type of trust and the timing. In North Carolina, a revocable living trust usually does not protect assets for Medicaid long-term care because the assets are still treated as available to the person who can revoke the trust. An irrevocable trust can help in some situations, but transfers to it can trigger Medicaid penalties if made within the look-back period, and the trust must be drafted so the assets are not available back to the person who created it.

Understanding the Problem

Under North Carolina law, the question is whether placing an older adult’s expected incoming funds into a trust can keep those funds from being treated as available assets if long-term care is needed later and Medicaid is applied for. The decision point is the trust design: can the person still get the money back, or has the person truly given up control and access in a way Medicaid recognizes. Timing also matters because Medicaid reviews certain past transfers when deciding whether to impose a period of ineligibility for long-term care coverage.

Apply the Law

In North Carolina, Medicaid eligibility for long-term care is administered through the county department of social services under state rules that follow federal Medicaid law. A trust can be part of planning, but Medicaid focuses on (1) whether the assets are still available to the applicant and (2) whether assets were transferred for less than fair market value during the look-back period, which can cause a penalty period where Medicaid will not pay for certain long-term care services. In general terms, revocable trusts usually do not change “availability,” while certain irrevocable trusts may reduce availability if the person who created the trust cannot get the principal back and cannot direct it for personal benefit.

Key Requirements

Trust type and control: If the trust can be revoked or the person can demand distributions, Medicaid typically treats the trust assets as still available.
Transfer and look-back risk: Moving assets into a trust can be treated as a transfer; if it is for less than fair market value and within the look-back window, it can create a penalty period for long-term care Medicaid.
Access to principal and distributions: Even with an irrevocable trust, drafting matters. If the trust terms allow payments that effectively cover the person’s support in a way Medicaid counts as available, the plan may not work as intended.

What the Statutes Say

N.C. Gen. Stat. § 108A-58.1 (Transfer of assets; Medicaid ineligibility) – Authorizes a penalty period for certain long-term care Medicaid services when assets are transferred for less than fair market value on or after the look-back date.
N.C. Gen. Stat. § 108A-58.2 (Undue hardship waiver) – Requires notice and sets a process to request a waiver of a transfer penalty if it would cause undue hardship.

Analysis

Apply the Rule to the Facts: The facts describe an older adult moving to North Carolina and expecting to receive a significant amount of money. If those funds are placed into a revocable living trust (a common estate planning tool), Medicaid generally still treats the funds as available because the trust can be changed or revoked and the funds can be used for the person’s benefit. If the funds are transferred into an irrevocable trust designed to restrict access to principal, that may help in some cases, but a transfer made within the look-back period can trigger a penalty period under North Carolina’s transfer rules.

Process & Timing

Who files: The Medicaid applicant (or authorized representative). Where: The county department of social services in the North Carolina county of residence. What: A Medicaid application plus verification of income, resources, and any trust documents (full trust agreement and amendments). When: Before Medicaid coverage is needed; transfers are reviewed back to the look-back date referenced in state law.
Agency review: The county reviews bank records, transfers, and trust terms to decide whether trust assets are “available” and whether any transfers create a penalty period for long-term care services.
If a penalty is assessed: The county issues notice of the penalty period. If the penalty would cause undue hardship, a waiver request may be available, but it requires quick action and documentation.

Exceptions & Pitfalls

Using the wrong trust: A revocable trust often helps with probate avoidance and management, but it usually does not reduce countable resources for Medicaid long-term care planning.
Funding an irrevocable trust too late: Even a properly drafted irrevocable trust can create a transfer penalty if funded within the look-back period.
Trust terms that allow “too much” access: If the trust is drafted so the person can get principal back (directly or indirectly), Medicaid may still treat the assets as available.
Incomplete documentation: Missing trust documents, amendments, or proof of transfers can delay eligibility decisions and complicate penalty calculations.
Assuming hardship will fix it: An undue hardship waiver exists, but it is not automatic and requires proof and deadlines can be short once notice is issued.

For readers also comparing trust-based planning with other approaches, see other trust or asset-protection options and, for home-related concerns, protecting a parent’s home from Medicaid recovery.

Conclusion

In North Carolina, a trust can help protect assets for future long-term care Medicaid only if it is structured so the assets are not available to the person and it is funded with careful attention to Medicaid’s transfer rules. A revocable living trust usually does not accomplish Medicaid asset protection. The most important next step is to review the expected funds and goals and, before any transfer, create and fund the right plan in a way that avoids a transfer penalty under the Medicaid look-back rules.

Talk to a Estate Planning Attorney

If you’re dealing with planning for future long-term care and Medicaid while expecting a significant influx of money, our firm has experienced attorneys who can help you understand your options and timelines. Call us today at [CONTACT NUMBER].

Disclaimer: This article provides general information about North Carolina law based on the single question stated above. It is not legal advice for your specific situation and does not create an attorney-client relationship. Laws, procedures, and local practice can change and may vary by county. If you have a deadline, act promptly and speak with a licensed North Carolina attorney.