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What is a VA asset protection trust?

On Behalf of | Jul 1, 2023 | Estate Planning

A VA asset protection trust specifically allows veterans to protect their assets while remaining eligible for veteran benefits.

It is irrevocable, meaning you cannot remove the assets once you place them in the trust.

The roles of grantor, trustee and beneficiary

The grantor of a VA asset protection trust is the veteran. The trustee is often a relative or friend chosen to control the trust and oversee the distribution of assets.

The beneficiaries are the grantor’s children. Upon the grantor’s death, the trustee makes all decisions regarding how to distribute the assets to the beneficiaries named in the trust documents.

You can also appoint a trust protector. The appointee has the power to remove a trustee and replace them if the trustee’s actions are not in line with the trust’s purpose.

VA asset protection and Medicaid

The most common reason people choose to place their assets in a VA asset protection trust is that it is usable in the Medicaid environment. For this reason, Medicaid applies a five-year lookback to VA asset protection trust holders. This means that the Medicaid office will evaluate the last five years during their financial analysis.

Therefore, once you create the trust and fund it with your assets, you will need at least five years to pass before applying for Medicaid benefits. Once the five-year mark passes, you are safe to apply for Medicaid without the assets in your trust impacting your eligibility.

A VA asset protection trust is often just one part of a full estate plan designed to ensure your plans come to fruition.