An irrevocable Medicaid trust may be used to help protect assets from liquidation when the need for an extended nursing home stay arises. Medicaid Asset Protection Trusts (MAPT) can be a valuable planning strategy to meet Medicaid’s asset limit when an applicant has excess assets. This is important to mention because one might find it easy to confuse MAPTs and QITs. A MAPT is an irrevocable trust, so once you transfer assets to the trust ownership, you cannot under most circumstances transfer them back. Even though the MAPT owns the assets, you do still receive some benefits. A MAPT is an irrevocable trust, so once you transfer assets to the trust ownership, you cannot under most circumstances transfer them back. All trusts also fall into one of two general categories. However, this asset limit can be lower or higher depending on the state in which one resides. In addition, price varies by geographic location, with the price in urban areas generally costlier than in rural areas. However, there is one exception to this rule. In Michigan, a home is considered a countable asset when placed in a MAPT. Rather they do a package of sorts. Why Are Medicaid Asset Protection Trusts Important? Additionally, when you transfer ownership directly, other circumstances can then threaten that asset. This is because the nationwide average cost of nursing home care is over $7,750 / month, and a MAPT prevents one from having to pay out of pocket for nursing home expenses (and other long-term care costs). Therefore, assets in this type of trust would have to be “spent down” to meet Medicaid’s asset limit in order for one to qualify for Medicaid. This is done via the deceased’s estate. First, some attorneys don’t strictly do MAPTS. When properly drafted and administered, these trusts protect the assets while permitting the beneficiary to obtain and maintain qualification for public benefits. If the parent lives in a nursing home and the children want to avoid a sale to prevent Medicaid reimbursement, the house could sit unused for years, requiring funds for upkeep with little to no benefits. A: Our Medicaid Trust is an irrevocable asset protection trust that you create while you are living, that protects your assets from Medicaid and nursing homes PLUS probate PLUS creditors. Irrevocable funeral trusts, also known as burial trusts, are used to protect small amounts of assets specifically for funeral and burial costs. The Levin Law Group charges a flat fee of $3,000.00 for the creation of a Medicaid Trust. This makes it important to have the trust created by someone who is familiar with the MAPT laws in one’s specific state. In most circumstances, revocable trusts do not keep assets safe from Medicaid’s asset limit and estate recovery. When you form a MAPT, you can continue to receive income and your home as your residence just as you did before you established the trust and transferred ownership. This type of trust protects not only the assets of the grantor, but also beneficiaries of the estate, which are usually the children of the grantor. This is because MAPTs are a violation of Medicaid’s look back period if not set up prior to 5 years (2.5 years in California) before one applies for Medicaid. This page is about Medicaid Asset Protection Trusts. The trustee is the manager of the trust and controls the assets in the trust. That said, there are other planning strategies for those who need Medicaid currently or in the near future. Adult Guardianship & Legal Guardianship of Disabled Adults As previously mentioned, the rules change frequently, as well as vary by state. There are several other types of trusts that are relevant to Medicaid eligibility, but will not be covered in this article. Medicaid asset protection trusts are ideal for persons who are healthy and don’t foresee needing Medicaid in the near future. Medicaid Asset Protection Trusts (MAPT) Irrevocable Trusts – a Valuable Tool in Medicaid Planning An irrevocable trust sounds like obscure lawyerly jargon. For example, if you want to preserve your family home for your child’s benefit, you may be tempted to simply transfer the home into your child’s name right away. What are Medicaid Asset Protection Trusts (MAPT)? White Plains, NY 10601 All assets that are in a revocable trust will be considered when determining Medicaid eligibility. This is why these trusts are also known as “Income Only Trusts” (because the creator can only withdraw income) or “Medicaid Asset Protection Trusts” (because the principle is protected for transfer to future generations). There are reasons why transferring assets through a MAPT can be preferable to transferring ownership directly to a child or another beneficiary while you are living. While each state runs its Medicaid program within federally set guidelines, there is “wiggle” room for each state to set its own rules within those larger guidelines. This may include a pour-over will, powers of attorney, advance health care directive (living will), and HIPAA medical information releases, in addition to the MAPT. In addition, capital gains taxes are a common concern with gifting. This can raise some issues, however. There are two people that don't do the Medicaid Asset Protection Trust. Private Medicaid Planners often work with attorneys to keep costs low for their clients. The cost of creating a Medicaid Asset Protection Trust varies significantly from a low of $2,000 to a high of $12,000. They no longer are considered owned by the individual. Law Estate Administration & Probate No. When considering the cost, there are a lot of variables. In CA, a home, even in a revocable trust, is exempt from Medicaid’s asset limit and is safe from estate recovery. Your son may get divorced and may lose half the value of the house in the process. The person that creates the trust, called the trustor, is the person that is seeking to qualify for Medicaid. Simply stated, these trusts protect a Medicaid applicant’s assets from being counted for eligibility purposes. In addition, once the assets have been transferred to a MAPT, the trustee no longer has control or access to them. }. You will not qualify for Medicaid because Medicaid will "look back," see the transfer, and treat you as if you still possessed that $250,000 asset. This site is for information purposes; it is not a substitute for professional legal advice. Given the fairly expensive fees associated with the creation of a Medicaid Asset Protection Trust ($2,000 – $12,000), they are typically not used for assets less than $100,000. Therefore, it violates the look back rule. In order for the trust to be Medicaid exempt, the principal beneficiary must be someone other than the trustmaker. (For state specific asset limits, click here). Medicaid Asset Protection Trusts (MAPT) can be a valuable planning strategy to meet Medicaid’s asset limit when an applicant has excess assets. Generally, family trusts are not adequate in protecting money and assets from Medicaid because the language of the trust makes it revocable (meaning the trust can be cancelled or altered) or allows for money in the trust to be used for the Medicaid applicant’s long-term care costs. As of 2021, most states have an income limit of $2,382 / month for a single senior applying for long-term care. MedicaidPlanningAssistance.org is a free service provided by the American Council on Aging. Would you like to speak with an advisor on how using an asset trust can help you or your loved one qualify for Medicaid while preserving your assets? This type of trust is not suitable for persons who need Medicaid immediately or within a short period of time. An MATP allows a person to qualify for long term care benefits from Medicaid, while protecting assets from being depleted if long-term care is needed. This income will be counted against them for eligibility purposes, and could necessitate utilizing a Medicaid Income Trust (a/k/a qualified income trust or miller trust). Long-term care is expensive, and you do not want to watch your hard-earned savings dwindle to pay for a nursing home or home care. When properly established, a MAPT will allow the capital gains tax exclusion to apply to the entire primary residence. To get a better grasp of Medicaid asset protection trusts, it’s important to understand the terminology associated with them. Simply stated, these trusts protect a Medicaid applicant’s assets from being counted for eligibility purposes. Let’s back up; A Medicaid Asset Protection Trust is used to protect countable assets from both Medicaid’s asset limit and Medicaid’s estate recovery program, preserving them as inheritance for loved ones. In addition, a life estate will cause a parent to lose a significant amount of the capital gains exclusion if their primary residence sells. In short, when planning for Medicaid, revocable trusts are not useful tools. (To see income requirements in the state in which one resides, click here). The experience of the attorney can also impact the cost. In reality, it’s a concept that can be easily understood by the layman. That means if you apply for Medicaid within five years, you’ll have to pay a penalty. That person cannot be the trustee of the trust, but can reserve the power to remove the trustee and replace that person at any time. In most cases, transferring retirement accounts (401k’s and IRAs) is not recommended due to tax implications with cashing out the plans and transferring them to a MAPT. By submitting this form, you agree to our. One way to protect those assets is to transfer them into a Medicaid trust. A Medicaid Asset Protection Trust is a type of trust that can be created to help Medicaid applicants qualify for Medicaid while protecting their assets. While the price might seem high, in reality, a MAPT ends up saving persons money in the long run. Incorrectly setting up a MAPT can inadvertently cause one to be ineligible for Medicaid, defeating the purpose of creating one. (New York is in the process of implementing a 30-month look back period for long-term home and community based services).
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