by Anita Schnee, Attorney at Law
Suppose you are in relatively good health, but you are concerned that you or your spouse might need nursing-home care in the foreseeable future. Around seventy percent of Americans will need that kind of care at some point. So this would be a good time to think about hiring us to create a Medicaid Asset Protection Trust (MAPT) for you. The idea is to protect your assets if, later on, you might need Medicaid to meet the extremely expensive costs of long-term care.
To be eligible for benefits, applicants must own essentially nothing. A MAPT creates that situation for Medicaid purposes. You, as the creator of the trust, deposit all or much of what you own into the trust. The trust becomes the titular owner. A trustee – frequently a trustworthy child – takes over the management of the assets. He or she ensures that your family’s financial needs are met. Under current rules, as long as you stay out of the nursing home for five years after the creation of the trust, everything inside the MAPT will be protected, there will be no penalty, and the Medicaid program will pay.
A MAPT establishes how money is to be distributed, during your lifetime, to whomever you choose. The trust directs how the money is to be spent. It could be for a specific worthy purpose, or, if you as trust creator were to need funds, the beneficiaries could step in and provide what you need.
Once you and your spouse pass, the MAPT functions like a Will. It spells out to whom you leave your property, but with the significant advantage over a Will that usually no public probate proceedings are necessary. Inheritances can be given outright, or they can be kept in trust for your beneficiaries’ benefit. This latter attribute is important if you are concerned about your beneficiaries’ ability to manage money, or they need to be protected from legal liability, financial fallout from divorce, or bankruptcy.
To satisfy Medicaid requirements, a MAPT must be irrevocable. This is essential because after all, if you were free to change trust terms (like, for example, to permit you to sell a piece of property and spend the proceeds), you could be said to own those assets. In that case, the Medicaid program would require you to pay for your nursing-home care until essentially all your assets were gone.
Actually, irrevocability sounds scarier than it is. There are ways to give independent third parties the power to change trust terms if need be. Furthermore, you retain the power, for as long as you live, to change who inherits your property. This is important to avoid capital-gains taxation and, also, if you become dissatisfied with a named beneficiary’s conduct.
