Medicaid Asset Protection Trust Planning

Medicaid is a program that provides significant health care and long-term care benefits to many Americans who qualify. Unfortunately, to qualify for Medicaid, you must have a low income and few assets. This means that if you’ve spent a lifetime working and saving, you must take steps to qualify for Medicaid before the need arises.

The default mode for qualifying for Medicaid is to sell off your assets until you meet income and asset limits that make you eligible for benefits. A far better approach is to place your assets in an irrevocable trust to protect them. Then you are no longer the owner of these assets. The trust owns the assets and uses them to your benefit. But they do not count against your eligibility for Medicaid.

Medicaid eligibility is incredibly complex. Establishing a Medicaid asset protection trust requires an experienced attorney. The attorneys at Brady Cobin Law Group have more than 35 years of experience helping individuals qualify for Medicaid while protecting their assets. Contact us today with your questions about how to prepare for Medicaid eligibility.

Qualifying for Medicaid Benefits

medicaid elegibilityMedicaid is a health insurance program for certain low-income and needy people that is funded by federal, state and county dollars and administered by each state. Its assists elderly or disabled individuals, children and their parents, people who need long-term care.

North Carolina offers several different Medicaid long-term care programs. Their eligibility requirements and benefits vary based on the program and on whether the beneficiary is single or married.

Medicaid becomes a concern for most people after they reach the age of 65 and begin to plan for long-term care, such as living in a nursing home.

Income Requirements

To be eligible for Institutional / Nursing Home Medicaid in North Carolina, the elderly or disabled beneficiary’s income must be less than the amount Medicaid pays for nursing home care ($5,470 to $7,775 per month or $65,640 to $93,330 per year in 2021) and their assets must be worth no more than $2,000 for a single applicant or $3,000 for married applicants who are both applying.

Two or three thousand dollars in assets is a very low figure for many people, even with Medicaid exempting your primary residence and one motor vehicle from the count. To reduce their assets, people transfer ownership of property, stocks, and savings accounts through gifts or by selling them.

But Medicaid has a 60-month look-back period. This means that Medicaid is going to review all of your financial transactions for five years prior to the date of your application to see whether you made any transfers for less than fair market value. These will be disallowed and counted among your assets.

The legal way to get over this eligibility hurdle is to plan ahead and create a Medicaid asset protection trust.

What Is a Medicaid Asset Protection Trust (MAPT)?

A Medicaid asset protection trust, or MAPT, is an irrevocable trust funded for your benefit that is at least five years old when you apply for Medicaid.

Some trusts count as assets under Medicaid, but irrevocable trusts do not. An irrevocable trust is a type of trust that is hard to change or modify. When you put assets into an irrevocable trust, you no longer have control over them. However, the trust can be structured for your benefit and the benefit of others you care to assist financially.

Under a MAPT, a trustee is appointed to manage the trust’s assets. While neither the trust’s creator nor their spouse can be trustees, adult children and other relatives can be named trustees. The trustee must follow the rules of the trust, which would spell out how the trust’s assets are to be used.

The trust would also name a beneficiary or beneficiaries to benefit from the trust after the trust grantor passes away. This could be children, a school, a charity, or a combination thereof, with the rules of the trust specifying how assets are to be distributed.

How Does a Medicaid Trust Works?

There are four factors important to keep in mind about a Medicaid Asset Protection Trusts:

  • Assets in a revocable trust still count toward Medicaid’s asset limit. This is because the person who created the trust retains control of the assets held in the trust and can revoke it. You must establish an irrevocable trust to have a true MAPT.
  • Once you create and fund an irrevocable trust, your trustee has control over your assets. They are to control them for your benefit, but you’ve given up the right to say how that’s done. For example, the trustee may decide how funds in the trust will be invested or whether to sell real estate or personal property held by the trust.
  • MAPTs are subject to Medicaid’s look-back period. You must establish an irrevocable trust five years or more before you apply for Medicaid, or Medicaid will consider the transfer of assets into the trust a gift and count those assets against your limit.
  • An irrevocable trust can protect your assets against Medicaid estate recovery. Typically, Medicaid can seek assets from your estate after you die to reimburse the Medicaid program for the cost of care you received at a long-term care facility. But you no longer own assets in an irrevocable trust. Therefore, they are not part of your probated estate when you die.

Let Our Raleigh, NC Medicaid Planning Attorneys Help You

Medicaid is an entitlement that offers significant long-term health care benefits. But you’ll need to plan ahead to avoid financial penalties when you need to access Medicaid. If you have worked to obtain assets you hope to pass on to loved ones, charities, establishing a Medicaid asset protection trust may be the right approach for you. The Brady Cobin Law Group is here to help if you would like to know more about trusts and other strategies for protecting your assets. Contact us today.