Planning Ahead for Long-Term Care with Medicaid Asset Protection Trusts
Planning for long-term care can feel overwhelming. Between competing financial priorities and the rising costs of care, many families wait until a crisis hits to address this crucial issue. By then, valuable strategies may be less effective. One such option to consider early is establishing a Medicaid Asset Protection Trust (MAPT), which can help one qualify for Medicaid payment for long-term care while protecting personal assets.
What is a Medicaid Asset Protection Trust (MAPT)?
A MAPT is a legal tool designed to shield particular assets from being counted when determining Medicaid eligibility. In New York, the current Medicaid asset limit is $31,175 (as of 2024). If the combined value of your countable assets exceeds this limit, you may be ineligible for Medicaid benefits. By transferring assets into an irrevocable MAPT, you can potentially qualify for coverage while protecting your assets and preserving them for your loved ones.
Learn more about Medicaid eligibility here.
How Does a Medicaid Asset Protection Trust Work?
There are three key parties involved in a MAPT:
- Grantors: The person or persons who create the trust and transfer assets into it.
- Trustees: The individuals responsible for managing the trust assets according to the grantor’s wishes outlined in the trust agreement.
- Beneficiaries: The persons or entities who will receive the trust assets upon the grantor’s passing or when specific conditions are met.
It is important to note that although the grantors can receive income from assets placed into the MAPT, the grantors should never receive principal from the trust assets during their lifetimes, if they want to qualify for Medicaid. This would allow the Medicaid program to count the trust assets toward the Medicaid asset limit.
What Assets Can Be Placed in a MAPT?
A variety of assets can be placed in a MAPT, including:
- Checking and savings accounts
- Stocks and bonds
- Mutual funds
- Certificates of deposit
- Real estate (including your primary residence)
Important Considerations:
- Retirement accounts like 401(k)s or IRAs are generally not suitable for MAPTs in New York. These accounts are typically excluded from Medicaid’s resource test when in “payout status.”
Creating a Medicaid Asset Protection Trust
Establishing an MAPT is a complex legal process. Here are some key factors to consider when planning how to protect assets from Medicaid:
- Timing: For the trust to be effective, transfers to the MAPT must be made outside the Medicaid look-back period, which is generally five years in New York for individuals who apply for Medicaid payments for skilled nursing facility care. Currently there is no transfer penalty for individuals who apply for Medicaid payments for home care. However, a recent change in New York law will make transfers subject to a thirty month transfer penalty for home care eligibility.
- Irrevocable Trust: MAPTs must be irrevocable, meaning the assets cannot be retrieved by the grantor once transferred.
- Beneficiaries: You can designate your children, parents, or other loved ones as beneficiaries. It’s important to choose a trusted individual as the trustee.
- Legal Guidance: An experienced elder law attorney can ensure your MAPT is properly drafted and implemented to comply with Medicaid regulations and maximize its effectiveness.
A Valuable Tool, Not a One-Size-Fits-All Solution
While MAPTs can be a powerful tool for protecting assets and enabling future qualification for Medicaid, they are not suitable for everyone. Consulting with an elder law attorney is crucial to determine if a MAPT aligns with your specific circumstances and long-term care goals.
Begin Planning with Bleakley Platt & Schmidt, LLP
The attorneys of our Elder Law & Special Needs Practice Group have extensive experience guiding New York families through the complexities of Medicaid planning and applications. We can help you determine if a Medicaid Asset Protection Trust is the right option for you and ensure it is structured to meet your needs. Contact us today to schedule a consultation.