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Medicaid Asset Protection Trusts

Introduction – The Emerging Field of Elder Law

As an estate planning and elder law attorney, one of my goals is to educate folks on how to get the benefits they are entitled to without wiping out all of their assets. According to the U.S. Department of Health and Human Services, someone who is 65 years old today has nearly a 70% chance of needing long-term care. In Oklahoma last year, the average cost of a semi-private room in a nursing home exceeded $53,000.

Given the above figures, even those with significant means could struggle to pay for a nursing home. Enter Medicaid. Medicaid is a government program designed to help with the costs of long-term care. This is a great tool to have in one’s toolbox. But there is a caveat: Medicaid has strict asset requirements. Although exceptions exist, married couples can generally keep only about half of their money. The situation is even more dire for single individuals, who are limited to $2,000. Fortunately, there is a way to protect assets and at the same time qualify for these vital benefits. It’s called a Medicaid Asset Protection Trust.

What is a Medicaid Asset Protection Trust?

A Medicaid Asset Protection Trust (MAPT) is a special type of irrevocable trust. Unlike a revocable living trust, the grantor cannot terminate or cancel a MAPT. For this reason, some people shy away from it. Nevertheless, a MAPT is more flexible than it might first appear. That’s because the grantor controls the trustee designation. In short, the grantor can appoint a trustee of their choosing, and can change that trustee at any time. What’s more, while the principal of the MAPT is unavailable to the grantor, the grantor and the grantor’s spouse can receive all of the income generated by the MAPT. For example, let’s say the MAPT owns a portfolio of stocks and bonds valued at $200,000. The grantor is prohibited from cashing out the investments, yet can be paid all of the dividends and interest on them.

Conclusion – Advance Estate Planning is Best

A MAPT is a great way to ensure one can pass down an inheritance to family and loved ones regardless of whether they require long-term care during their lifetimes. The catch is that to be fully effective, a MAPT must be in place for at least 5 years before the grantor applies for Medicaid. This makes advance planning imperative. Consequently, I encourage anyone who is concerned about dealing with the costs of long-term care to contact an estate planning and elder law attorney today.