What is a Medicaid Asset Protection Trust?

On Behalf of | Feb 18, 2021 | Firm News |

If you have a decent amount of assets and anticipate acquiring more in your future, it would be wise of you to make estate planning an ongoing priority. Advanced planning almost always yields the best results, as it allows you to take advantage of more powerful tools. One such tool is the Medicaid Asset Protection Trust.

According to the American Council on Aging, Medicaid Asset Protection Trust is a tool you can use to reduce the value of your assets and become eligible for Medicaid, should you eventually need it. While a valuable estate planning strategy, MAPT come with several rules and limitations. It is important that you understand each if you hope to take advantage of an MAPT in your later years.

A MAPT can help you meet Medicaid’s strict eligibility requirements

Medicaid’s financial eligibility requirements are not just strict — they are nearly impossible to meet. While state laws have some leeway with their own programs, the asset limits for eligibility purposes, generally speaking, is $2,000. This means that if you have $2,000 worth of non-exempt assets in your possession at the time of applying for Medicaid, you are ineligible for financial assistance. While, given this asset limit, most people are ineligible for Medicaid, most also cannot afford the cost of long-term care.

A MAPT is one of the few Medicaid-compliant trusts available to estate planners. Unlike several other types of commonly used trusts, a MAPT is irrevocable. Medicaid requires this, as if it were revocable, you could easily access the assets and, therefore, use them to pay for long-term care. Additionally, you cannot name yourself as a beneficiary on a MAPT. If you could, you would, again, have access to the assets and, again, be able to use them to pay for your support and care. When you place assets into a MAPT, they no longer belong to you but rather, to your children and loved ones, which creates a win-win situation for everyone.

Advanced planning is essential

Ideally, you will create a MAPT long before you actually need one. MAPTs violate Medicaid’s lookback period. Before approving or denying an application, Medicaid looks back 60 months (or 30, in cases involving California residents) to ensure that, during that time, applicants did not sell or give away assets for less than they are worth and for the purposes of meeting Medicaid eligibility requirements. Medicaid considers the transfer of assets into a trust as “gifting,” an act that violates lookback rules. If you fund your MAPT during the lookback period, you may become ineligible for Medicaid support for a set period.