Medicaid Asset Protection Trust

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The Medicaid Asset Protection Trust (MAPT) is a specialized trust that protects assets from long-term care and nursing home costs. It allows for a client to qualify for Medicaid to get those costs covered.

 

Grantor and Trustee:

The client creating the trust is known as the Grantor. The individual in charge of the trust’s management is the Trustee. With the MAPT, the Grantor and the Trustee must be different people. The Grantor cannot have the right to access and manage the trust. Therefore, if a client creates a MAPT to protect assets, he or she will usually make an adult child or other relative the trustee. If there is any problem with the Trustee down the line, the Grantor retains the right under the trust to fire and replace him/her.

 

Income Only

A great many clients place only their houses inside their trusts. Real property is often one of the largest parts of a client’s estate, and it is certainly always exposed to probate and long-term care costs. If clients choose to also place money inside the MAPT, then the income-only rule applies. They can withdraw income, interest, and dividends out of the trust, but principal stays locked in. Clients typically leave a significant amount of cash outside the trust so that they have savings to draw on and use to live comfortably.

 

Irrevocable Trust

The MAPT is a type of irrevocable trust. The term “irrevocable” be unsettling to people because it implies rigidity and loss of control. However, the title is something of a misnomer here.

The Grantor reserves the right to change the beneficiaries or the trustees of the MAPT at any time. In other words, clients can alter who will inherit their assets and who will manage the trust at any time, without reservation.

Moreover, under New York State law, an irrevocable trust can be revoked. It is rarely done, as clients would lose the protections from long-term care and nursing home costs that they set up. But it is possible if all of the parties to the trust (beneficiaries and trustees) sign off.

 

Five Year Look-Back

When someone divests their assets or makes a trust for the purpose of Medicaid Planning, there is a waiting period of five years before they qualify to get Medicaid to cover their nursing home care. For example, someone who made a trust on July 31, 2015 will be eligible on August 1, 2020. When a nursing home patient applies for Medicaid, they are required to produce bank statements and other financial records going back 60 months. If these records show transfers to trusts or other entities, it will limit or sometimes eliminate their Medicaid eligibility.

Community Medicaid (care in the home) does not have the same look-back period, and it can be sought out immediately when acquired
If a loved one is in need of nursing home care right away and there is no chance of passing through a look-back period, all hope is not lost. There are still strategies that elder law attorneys can use to protect a portion of the assets.

 

Selling a Home

Many clients decide to sell their homes after making MAPT’s. This can be done seamlessly. Clients pick out a broker and arrange for the sale. But at the closing it is the trustee that has to sign at the closing, rather than the client. The proceeds from the sale of the house go to a bank account inside the MAPT. Those proceeds can be invested or a new property can be purchased inside the trust. None of this restarts the five year look-back period.

See also: Medicaid Planning FAQ’s