Medicaid Asset Protection Trust

A Medicaid Asset Protection Trust can help you to qualify for your long-term Medicaid care when you have assets in excess of their limits, without spending those assets down. By transferring assets into this type of irrevocable trust they protect them from being counted against you for eligibility purposes. In this article, we will go over the basics of how a Medicaid Asset Protection Trust (MAPT) works.

Why Are MAPTs Important?

For most states Medicaid’s asset limit is $2,000. This means any assets you own over this limit, excluding your residence and vehicle, must either be spent down or placed into a MAPT. A Medicaid Asset Protection Trust allows you to pass your assets to your loved ones and not be completely depleted from paying for your care.

How Does a Medicaid Asset Protect Trust Work?

First, there are a few phrases we need to define. The person who creates the trust and transfers their assets into it is known as the grantor, trust maker, or settlor. Next is the trustee, this is the person who manages the assets inside the trust. Lastly, is the beneficiary. This is who will receive the remaining funds when the grantor dies. The grantor cannot be the beneficiary since that would give them access to assets and Medicaid would count them against them when trying to qualify for long term care.

A MAPT must be irrevocable, this means once it is signed the terms cannot be cancelled or changed. Once you transfer an asset into the name of your trust it is no longer considered to by owned by you. However, the trust must be set up and assets must be transferred at least 5 years before applying for long term care Medicaid services. This means this kind of trust is not suitable for someone who needs benefits immediately or within a short period of time.

Benefits and Shortcomings

The main benefit of a MAPT is it allows you to meet asset limit requirements without spending down assets. It allows you to protect and pass on your hard earned wealth to your beneficiaries. It also keeps your assets safe from Medicaid Estate Recovery. This is where Medicaid attempts to collect recompense from your estate for the total value of services provided.

There are two main shortcomings you have to weigh in the balance. First, the planning and transfers must be made well in advance of needing care. Additionally, you lose control of the assets you place in the trust. You must decide if dealing with these problems are worth the benefits a MAPT provides.

What Assets Can You Place Into a MAPT?

You can put your residence into a MAPT. You even have the flexibility to sell it and buy a new home. You also can put in additional real estate, checking and savings accounts, stocks and bonds, mutual funds and CDs. If you put income producing assets into the trust the grantor can collect the income while keeping the principal protected. It is not recommended to transfer IRAs or 401ks because of tax implications.

Creating a Medicaid Asset Protection Trust

It is important to start sooner then later when it comes to Medicaid planning. Meet with a qualified estate planner who can help you to properly prepare your documents for you.

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