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What is a Medicaid Asset Protection Trust (MAPT)?

A Medicaid Asset Protection Trust is exactly as it sounds, it is a trust designed to protect assets from being counted for Medicaid eligibility.

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. To qualify for Medicaid, household assets must be under a certain level. Rules about asset levels are strict, and there is a five year look back period to see if an individual qualifies.

As long as the trust is created and assets transferred five years before the donor applies for Medicaid long-term care benefits, Medicaid will not penalize the donor for transferring assets, and the trust’s existence will not impact Medicaid eligibility.

Assets placed in a Medicaid Asset Protection Trust are not considered countable for Medicaid.  Once the trust owns assets, Medicaid cannot count the asset and the asset cannot be seized to reimburse long term costs.

All MAPTs are irrevocable trusts, so once any assets are placed in the trust, the grantor loses control of the assets.

Do not transfer assets into a MAPT without a long-term plan for the assets and their eventual transfer to other family members.

A MAPT is not the only way to protect the family home from Medicaid.

To protect the home from Medicaid “estate recovery,” and protect the surviving spouse’s ability to stay in the family home, sometimes it makes sense to transfer the home to the well spouse. Certain assets are not considered countable for Medicaid eligibility. Under federal law, a well spouse may own and remain in the family home. A limited amount of assets may be retained by the spouse, but the limits are strict.

There are certain individuals who the house could be transferred without penalty:

  • A child under age 21 who is blind or disabled,
  • A trust for the “sole benefit” of a disabled individual under age 65,
  • A sibling who has lived in the home for two years before the Medicaid applicant’s move into a nursing home who already owns an equity interest in the home, or
  • A “caretaker child,” a child of the Medicaid applicant who has lived in the house for at least two years before the applicant moved into the nursing care facility and provided care that allowed the person to stay home instead of being moved into a facility.

If the house is sold by the person on Medicaid benefits while in a nursing home, they will become ineligible for Medicaid and the proceeds of the sale of the house may have to be used to pay the nursing home bills.

Before establishing an MAPT, consider:

Neither the grantor nor the grantor’s spouse may be a beneficiary of the trust principal. The trustee and/or beneficiaries must be on the same page in terms of how the asset will be used, maintained, and when it may be sold or if the intent is for it to be given to an heir.

The MAPT is usually drafted to preserve the donor’s ability to occupy the property for the trust for his or her lifetime, and the ability to change the beneficiaries who will receive the trust property. Tax implications are all unique, depending upon the situation.

Medicaid Asset Protection Strategies

Below is a partial list of strategies that are allowed in the state of Arkansas.

  • Gifting Plus Partial Return
  • Make Exempt Transfer (any asset)
  • Make Exempt Transfer to Sole benefit trust
  • Make Exempt transfer of home
  • Transfer Home, Retain Life Estate Interest with a gifting penalty
  • Purchase Life Estate in Home of Another (as long as it is the home of the applicant)
  • Purchase Prepaid Funeral Services Contract OR Create a Burial Savings Account
  • Purchase an Exempt Automobile
  • Make Exempt Renovations to the Home
  • Transfer assets to an irrevocable trust with gifting penalty (Medicaid Asset Protection Trust)

Gifting Away Assets

For gifting away assets, there is a “Safe Harbor” for assets that were gifted away more than 5 years before applying for Medicaid. Assuming there are no gifts made within the 5 year period, any gifts made more than 5 years ago, will be ignored for the asset eligibility test for Medicaid. This is referred to as the 5-year look back rule.

Assisting Individuals and Families

We develop long-term care plans to avoid depleting your loved ones’ assets should they become ill and need long-term care. For individuals who are already in a nursing home, despite the lack of planning, we still have the option to preserve some assets and still get you qualified for Medicaid benefits before these resources are exhausted.

Things to Ponder

Medicaid planning is very fact specific and not all planning techniques are feasable in every situation. Give us a call to schedule a consultation to review your planning options and to know more about asset protection planning.

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