Are you a taxpayer who has purchased long-term care insurance? Take note of your policy details and your premium amount, as you may be able to deduct the cost - or at least part of it - from your 2023 income.
What Are Medicaid Asset Protection Trusts?
Medicaid imposes strict rules on how much money and assets an applicant can have. To qualify for Medicaid, you must fall under the asset limit, which is $2,000 in most states.
Even with greater than $2,000 in assets, however, you may be able to get on Medicaid by establishing a Medicaid Asset Protection Trust (MAPT). When you put your assets in a MAPT, Medicaid will not count the money in the trust toward its resource limit.
Using Medicaid Asset Protection Trusts to Transfer Assets
After you create a Medicaid Asset Protection Trust, you no longer own the assets within it, allowing you to qualify for Medicaid following the five-year lookback period. People who are currently healthy but plan to go on Medicaid in the future might choose to use this Medicaid planning strategy.
It is essential to understand that MAPTs are irrevocable: Once you make the trust, you cannot change your mind and take those assets back. Your trust must be irrevocable for you to qualify for Medicaid because it means that you no longer own or control these assets.
In contrast to MAPTs, many types of revocable trusts, such as family trusts, are often ineffective in preparing for Medicaid. Having the power to revoke your trust would allow to retain control over your assets, and Medicaid would count the contents of your trust as part of your resources.
Creating a Medicaid Asset Protection Trust
Three parties are involved in a MAPT: the grantor, the trustee, and the beneficiary. When you make a trust, you become the grantor, the person who places assets into the trust. The trustee manages the trust, and the beneficiary — or beneficiaries — will receive your assets.
If you want your MAPT to ensure you qualify for Medicaid, you must name someone other than yourself or your spouse as the beneficiary. Designating yourself as the beneficiary would mean giving yourself assets, which Medicaid would count toward its asset limit.
You can, however, select your children or parents as beneficiaries. Using a MAPT, you can also make sure they get those assets when you pass away.
What Can You Place in a Medicaid Asset Protection Trust?
As part of your Medicaid planning strategy, you can place many types of assets in a MAPT, including:
- Checking and savings accounts
- Stocks and bonds
- Mutual funds
- Certificates of deposit
- Real estate that is not your primary residence
- In most states, your home
Although many states allow you to place your home in MAPT so that it will not count toward Medicaid’s resource limit after five years, Medicaid regulations vary by state. In Michigan, for example, placing your home in a MAPT will not prevent it from counting toward the asset limit.
Benefits and Drawbacks of Medicaid Asset Protection Trusts
Medicaid Asset Protection Trusts offer several benefits to individuals planning to apply for Medicaid:
- MAPTs preserve generational wealth, safeguarding assets for family members.
- After you pass away, the state cannot take your assets from your beneficiaries to reimburse them for your long-term care, as MAPTs avoid probate.
- Since nursing home fees can be exorbitant, MAPTs can save your family money, as they let you qualify for Medicaid once the lookback period has ended.
The drawbacks of MAPTs include the following:
- Once you establish a MAPT, you forfeit the control and use of your assets. If you need money, you will not be able to draw from the trust.
- The fees associated with preparing a MAPT can be costly, ranging from $2,000 to $12,000.
Speak with your attorney to learn about how using a Medicaid Asset Protection Trust could help you plan for your future.
ElderCounsel, the creator of Medicaid Asset Protection Trusts (MAPTs), offers them on its website.