Here’s a valuable tip from a recently published book from the ABA GPSSF Section.

Medicaid Restrictions and Third-Party Trusts

The Medicaid restrictions on trusts do not apply to a trust created by a third party for the benefit of another. Thus, a child can create a trust for an elderly parent providing that the trust income and principal can only be spent for supplemental needs after the payment of Medicaid and other public or private assistance benefits. The same concept applies for a parent creating this type of trust for a disabled child. The key to this trust is that the disabled or elderly person remains eligible for Medicaid benefits, which includes not only nursing home expenses but also health care expenses. Trust funds are used only as a supplement after these benefits are paid.

For a sample testamentary trust, turn to Understanding Elder Law: Issues in Estate Planning, Medicaid and Long-Term Care Benefits.

http://www.abanet.org/abapubs/books/5150288