Medicaid Asset Protection Trust

There are generally three ways to pay for nursing home care when you or a loved one needs it:

  1. By purchasing a long-term care insurance policy.
  2. By paying for the cost of nursing home care yourself; or
  3. With Medicaid benefits, if you qualify.

Unfortunately, most people don't own long-term care insurance. Nor can they afford the expensive cost of nursing home care on their own for very long.

This means that most people who need nursing home care, if they live long enough, will end up depleting all of their money and assets on the care they need and then afterward, rely on Medicaid to pay for that same care.

Medicaid requires you to spend most of your resources first before it will cover the cost of a nursing home or assisted living facility. But through proper Medicaid trust planning, you can shield your assets and allow Medicaid to begin paying far sooner, and before you see the rapid depletion of your resources.

What is a Medicaid Asset Protection Trust?

A Medicaid Asset Protection Trusts (MAPT) is a type of trust used by eldercare planners to protect an individual's entitlement and eligibility for Medicaid long-term care benefits. There are specific asset and income requirements that must be met for an individual to be eligible for Medicaid assistance.

Since Medicaid is a needs-based program, you generally cannot have more than $2000 in assets to qualify. By placing certain assets that you own into a MAPT that you have created, you can ensure that you will meet Medicaid’s strict asset requirements.

How Does a Medicaid Asset Protection Trust Work?

When you place assets into a MAPT, you are no longer the legal owner of those assets. The trust becomes the owner, and you become the trust beneficiary.

Although you no longer own the assets you place in a MAPT, you retain the right to enjoy and benefit from those assets, and to designate a trustee who will control them. Then, after you pass away, your trustee will distribute the trust assets to your beneficiaries in accordance with your instructions.

Most importantly, because you are no longer the legal owner of the assets held in your MAPT, they won't be counted towards the Medicaid asset limit. This will allow you to preserve those assets and pass them on to your loved ones, instead of depleting them to pay the high cost of nursing home care.

A MAPT is an irrevocable trust. This means that when you put your assets into a MAPT, you cannot take them back. But this irrevocability is what places the trust assets outside the reach of Medicaid, which would otherwise require you to deplete them before it provides you with assistance.

Medicaid Asset Protection Trust Benefits

A MAPT can help you ensure your financial wellbeing, and that your spouse at home is also protected from the cost of skilled nursing home care. This is to say that a MAPT can help you plan ahead to limit the possibility of going bankrupt or being impoverished due to the cost of nursing home care, and also ensure that your spouse is not left destitute after you are gone.

A MAPT shields your assets so that they are not included in the means test for Medicaid qualification. This can allow you to qualify for Medicaid, and preserve your most valued assets. For example, if you own a house worth a substantial amount of money, or have a decent amount of money in brokerage accounts, you can transfer these assets into a MAPT to qualify for Medicaid long-term care assistance, and still be entitled to use and enjoy these assets, as well as to receive income distributions from the trust.

To benefit fully from a MAPT, you must plan ahead. There is a 5-year lookback period, where Medicaid reviews all of the transfers you have made in the 5 years before applying for benefits. Medicaid performs this review to determine if you have intentionally given assets away to qualify for Medicaid. If it determines that you have, you will be subject to a period of Medicaid ineligibility, which can be very expensive if, during this period, you have to pay for nursing home care out of your own pockets.

Contact an Experienced Eldercare/Estate Planning Attorney Today

If you believe that you will need assistance from Medicaid to afford the cost of nursing home care for you or a loved one, remember that Medicaid will require you to spend down your own resources first, before it will step in to help. But by setting up a MAPT in time, you can ensure that Medicaid will begin to pay before you have to deplete the assets that you have spent a lifetime building up.

As a rule, if your MAPT is set up 5 years or more in advance of entering a nursing home facility, you should be able to protect 100% of your assets. However, the closer you get to needing nursing home care within those five years, the fewer assets you will be able to protect and pass on to your loved ones.

Many people wait until the last minute to think about how they will pay for nursing home care when they or a loved one needs it. But, because MAPTs require advance planning, we encourage you to consult with an experienced Eldercare/Estate planning attorney today.