A Medicaid Asset Protection Trust (MAPT) is a legal tool designed to help individuals protect their assets while still qualifying for Medicaid benefits to cover long-term care costs. Here’s how it typically works:
- Creation: You (the grantor) establish the trust and transfer assets into it. However, you can’t have direct control over the assets once they’re in the trust.
- Trustee: You appoint a trustee to manage the assets according to the terms of the trust. This could be a family member, friend, or professional trustee.
- Irrevocability: Once assets are transferred into the trust, they usually cannot be taken out. This is important because Medicaid has a look-back period during which it examines asset transfers to determine eligibility. If you were to transfer assets too soon before needing Medicaid, it could affect your eligibility.
- Medicaid Eligibility: Assets in the trust are not counted towards Medicaid eligibility, which can help you qualify for benefits while still preserving assets for your heirs. Most states require a trust to be in force for 5 years before you can use it to protect your property.
- Rules and Regulations: There are specific rules and regulations governing Medicaid and asset protection trusts, so it’s crucial to work with an attorney experienced in elder law or estate planning to ensure compliance and effectiveness.
Overall, a Medicaid Asset Protection Trust can be a valuable tool for protecting assets and securing Medicaid benefits for long-term care, but it’s essential to understand the legal implications and requirements involved.
Why shouldn’t I use a Revocable Trust?
Using a revocable trust for Medicaid asset protection isn’t typically effective because Medicaid considers assets in a revocable trust as countable assets when determining eligibility.
Here’s why:
- Control: In a revocable trust, you keep control over the assets and can terminate or change the trust at any time. Since you still control the assets, Medicaid considers them available to you to cover long-term care costs.
- Look-Back Period: Medicaid has a look-back period during which it examines asset transfers to prevent people from quickly transferring assets to qualify for benefits. If you transfer assets into a revocable trust and then apply for Medicaid within the look-back period, those assets could still be counted against you. Be sure to check your state for the laws concerning look-back periods. Most are five years but some are seven years.
- Irrevocability Requirement: To effectively protect assets from Medicaid eligibility, the trust must be irrevocable, meaning you can’t easily change or revoke it once it’s established. This requirement proves that you’ve genuinely relinquished control over the assets. The look-back rule may still apply so planning well ahead is crucial.
Using a revocable trust for Medicaid asset protection might not achieve the intended goals because Medicaid rules are designed to prevent individuals from easily sheltering assets while still accessing benefits.
An irrevocable trust, like a Medicaid Asset Protection Trust, is typically the preferred option for this purpose as it meets the legal requirements for asset protection while maintaining eligibility for Medicaid benefits.
How about two trusts? It can be done.
I got curious about the strategy for protecting assets while preparing for long-term care.
I do have long-term care insurance (which I’ll go into on another page) but I don’t have any significant assets either. I downsized a few years ago.
For those who own property and valuable assets, this always seems to be a topic of conversation when it comes to paying for nursing home care.
Here’s what I found.
Having both types of trusts can be a good strategy, but let’s unpack this a bit.
Medicaid will still go over any assets in your revocable trust to investigate any movement of assets that may disqualify you. The assets in an irrevocable trust are safe but remember that either type of trust has to be five years old. Some states require seven years, be sure to check.
Be sure to work with a qualified estate planning attorney to make sure you have your assets in the right basket. There are Elder Law attorneys as well who can advise you.
I am not a financial or legal advisor. I encourage you to work with a professional advisor.