Medicaid Asset Protection Trust

A Medicaid Asset Protection Trust (MAPT) can be a great method to prevent your assets from being used to pay for nursing home care costs. In order to use MAPT, however, you must plan far in advance.

Unlike Medicare (which doesn’t provide for long-term care), Medicaid is what’s known as a “means-tested program.” In other words, you have to meet certain requirements, such as a small quantity of land or money or a low income (or both) for Medicaid eligibility. These requirements are set by the state.

The amount of assets you may have to qualify for Medicaid ranges from around $15,000 to as little as $2,000, depending on where you live. If you are not eligible for Medicaid, you may have to pay for long-term nursing care by yourself, and it can be incredibly expensive. Hence, why people attempt to find other methods to provide for their care. Converting countable assets to non-countable assets is one of the methods that will make you or your loved one qualify for Medicaid sooner.

Buying long-term care insurance is one alternative, but it is the most expensive way to provide for a stay in a nursing home or long-term care center.  If you do not qualify for Medicaid and you are turned down for long-term care insurance coverage or cannot pay, a Medicaid Asset Protection Trust (MAPT) is an excellent option.

When assets are placed in a MAPT, the Medicaid recipient can still use the resources (e.g., live in their home or receive a set monthly income). However, the trust rather than the recipient is the official owner of the resources, so the government doesn’t count those resources for Medicaid qualification purposes.

To give an example, if you set up a Medicaid Trust, it would mean that your elderly family member can live in the house and drive the vehicle held by the trust. However, your relative will not be told they have too many resources to qualify for Medicaid-covered long-term care. That is because the assets will not be in their name.

Another benefit of the MAPT is that the jointly-held resources are available for the care of the senior citizen, and they are also able to be passed on to other relatives in the event of the original member’s death. These assets are not held individually by any member, so they are not exposed to risk via anyone’s debts, obligations, divorces, etc.

Medicaid Asset Protection Trust Form: Basic Information

There are many Medicaid Asset Protection Trust form templates available online, but it is advisable to consult with experienced estate planning or elder law attorneys in order to set up your Medicaid Trust. Each person’s individual situation is different, and elder law attorneys can set up your trust for your specific needs.

Estate planning and elder law attorney Paul Black of The Law Office of Paul Black specializes in helping older clients plan for long-term care, qualify for benefits and nursing home Medicaid, plan for the possibility of illness or incapacity, handle retirement issues, as well as set up a Medicaid Trust.

Establishing irrevocable trust in Medicaid will protect resources when the need for an elongated nursing home stay arrives. The ideal result of this strategy is to avoid spending all the money when admission to a long-term care center becomes necessary. It enables wealth to be preserved and passed on to another generation. However, strategies involving putting assets in irrevocable trusts should not be entered into lightly, especially if there are alternative protection plans available.

There are several benefits of a Medicaid Trust. Medicaid Trusts not only allow you to meet Medicaid’s asset limit without “spending down” assets but also protect the assets for the beneficiaries listed by the trustee. That means the assets in the trust are safe from Medicaid estate recovery. When a Medicaid applicant and recipient dies, the state where she or he lived and received Medicaid benefits tries to get reimbursement for which it paid for long-term care via the deceased’s estate. But, if the deceased’s home, real estate, and other assets are in Medicaid Trust, the state can’t collect them.

However, some states seek Medicaid estate recovery through probate. Even in these cases, there are ways to keep the Medicaid recipient’s home out of the probate procedure. In addition, if the home is in a life estate deed, it won’t go through probate because the deceased owns the home only while alive. Upon death, the ownership of the home in question is transferred to the beneficiary.

While the use of irrevocable trusts may be a powerful asset protection tool, there are a lot of priorities and conditions to equilibrium when analyzing whether it’s a wise strategy. Be sure to review the following factors and consult with a Georgia estate planning attorney before you make a choice.

Irrevocable Medicaid Asset Protection Trust: What to Consider?

• Passing control to a trustee. The dynamic of the people involved in the trust should be one of the very first matters to consider. The person entering into the MAPT should be comfortable with how the assets will be utilized prior to his or her passing. It is recommended that people avoid entering an arrangement that is irrevocable unless they are confident the named trustee(s) share in their intentions for the trust assets.

• Tax Concerns. Depending on your situation, you may need both an attorney and a financial planner or accountant to help establish your Medicaid Asset Protection so that you or your loved ones do not experience unfortunate tax effects. Here are a few tax-related questions to consider:

  • Will the trust beneficiaries be subject to capital gains taxes because contributions to trusts are deemed taxable presents?

  • Will the trust income be taxed at the original asset holder’s rate or the rate of the trust?

• Potential impacts on care. It is important to realize that while the irrevocable trust Medicaid approach is designed to conserve wealth, it expects that customers will use the Medicaid program to pay for a portion of their care. This may have an effect on the choice and sometimes the quality of care the customer is going to get. It is a common fear that facilities have different accommodations for patients who pay with private funds and for those who utilize Medicaid, although this may or may not actually be true.