The Medicaid rules also have certain exceptions for transfers for the sole benefit of disabled people under age 65. Even after moving to a nursing home, if you have a child, other relative, or even a friend who is under age 65 and disabled, you can transfer assets into a trust for his or her benefit without incurring any period of ineligibility. If these trusts are properly structured, the funds in them will not be considered to belong to the beneficiary in determining his or her own Medicaid eligibility. The only drawback to supplemental needs trusts is that after the disabled individual dies, the state must be reimbursed for any Medicaid funds spent on behalf of the disabled person.
For more on trusts in general, see the Estate Planning section of this site.