A Medicaid Asset Protection Trust, sometimes also known by names like a “Medicaid Qualifying Trust,” is a type of trust that is set up to stop an individual’s assets from being counted against their total assets for the purposes of calculating whether they are eligible for Medicaid coverage. Medicaid Asset Protection Trusts are an incredibly helpful tool and can be a huge part of an individual’s financial and trust planning in retirement. By using a Medicaid Asset Protection Trust, seniors can set aside a portion of their assets to ensure that they are not deemed ineligible for Medicaid because their total assets are too high. 

If you think that you or a senior loved one may benefit from a Medicaid Asset Protection Trust, make sure to consult a local attorney or financial advisor with experience helping seniors. To learn more about how Sunbound can help you or your senior loved one find and pay for senior care, reach out to us at info@sunboundhomes.com or request a demo here.

Why are Medicaid Asset Protection Trusts important?

To see why Medicaid Asset Protection Trusts are so valuable it’s important to do a quick refresher on Medicaid eligibility for seniors. As we’ve discussed before on the blog, there are two main factors that determine Medicaid eligibility: a health-based test and a finances-based test. When determining whether a senior applicant is financially eligible for Medicaid, state Medicaid agencies generally look at two pieces of financial information, the senior applicant’s income and their total assets. 

Each state has its own eligibility requirements whereby individuals above a certain asset-threshold are ineligible to apply for Medicaid. In Arizona, for instance, in order to be eligible for ALTCS (Arizona’s Medicaid funded healthcare program for seniors in Arizona) a senior applicant may have no more than $2,000 in assets if they are applying alone, and $4,000 assets when spouse are applying for ALTCS coverage together. It’s important to note that not every asset is included in this total, for ALTCS purposes the first $688,000 of equity value in an applicant’s primary home is excluded from the asset calculator, for example, and a Medicaid Asset Protection Trust is one further way to exempt your assets from your state’s Medicaid asset limit.

What is a Medicaid Asset Protection Trust

A Medicaid Asset Protection Trust (MAPT) is a type of trust that is specifically designed to protect assets while still allowing individuals to qualify for Medicaid benefits. Essentially, the assets that are placed into the trust are no longer considered to be owned by the individual who created the trust, and therefore do not count towards the Medicaid eligibility criteria. This allows an applicant to qualify for Medicaid without having to deplete their own savings, while also allowing them to hold on to some assets should they ever need long term care. 

One consequence of a Medicaid Asset Protection Trust is that because they are irrevocable trust, the person who created the trust loses control of the assets they put into the trust. So if investment are transferred to the trust, for example, you will continue to receive income generated from these investments but you won’t be able to sell or transfer these assets. 

Creating a Medicaid Asset Protection Trust

The first step in creating a Medicaid Asset Protection Trust is to consult with an attorney who has experience in creating these types of trusts. Before drafting any documents, make sure to consult with a local elder law attorney to ensure that a Medicaid Asset Protection Trust is right for you. While a Medicaid Asset Protection Trust can be a great way for a senior to manage their assets, MAPT’s arent for everyone and so it is important to consult an expert first. Your attorney will review you or your senior loved one’s financial situation and determine whether a MAPT is a good option for them.

If the attorney determines that a MAPT is appropriate, they will draft a trust agreement that outlines the terms of the trust. The trust agreement will include information about the trustee (the person who will manage the assets in the trust), the beneficiaries (the individuals who will receive the assets from the trust), and any other relevant details including how the trust will be managed or how the assets will transfer to other family members. Once the trust agreement is in place, the senior will need to transfer assets into the trust. This is known as funding the trust, and may include cash, investments, and other assets.

Medicaid Look Back Period

An incredibly important thing to remember is that Medicaid Asset Protection Trusts are not exempt from Medicaid’s look back period. The Medicaid look back period (which is 5 years in every state except California, where it is 2.5 years) is the period before which a senior applies for Medicaid during which time they are not allowed to give away assets simply for the purpose of bringing their income below Medicaid’s asset limit. If Medicaid determines that a senior purposefully gave away assets during this period of time to make themselves eligible for Medicaid, they could be deemed ineligible from applying for a period of time and so it is very important to make sure that you don’t run afoul of your state’s Medicaid look back period. 

Because the act of creating a Medicaid Asset Protection Trust is considered a gift, MAPT’s created during the Medicaid look back period are likely to be deemed violations. However, if the assets were placed in a Medicaid Asset Protection trust before the look back period started, then the assets are no longer considered countable assets when the senior applies for Medicaid coverage. Therefore, it’s very important to start thinking about Medicaid Asset Protection trusts well in advance of when you or a senior loved one might need one.

Benefits of a Medicaid Asset Protection Trust

The primary benefit of a MAPT is that it allows seniors to protect their assets while still being eligible for Medicaid benefits. This can be particularly important for seniors who have spent their lives building up a substantial amount of wealth and want to ensure that it is not completely depleted by healthcare expenses. Another important benefit is that the assets in an MAPT can avoid passing through probate. Because the assets in a MAPT are held in a trust, they are not subject to probate when the individual passes away. This can make the process of passing assets to beneficiaries much smoother and less time-consuming. Additionally, assets in a MAPT are also protected from creditors, which means that they cannot be seized to pay off debts or judgments.

If you or a senior loved one are thinking about applying for Medicaid coverage to help pay for some or all of your senior care bills, make sure to consult a local elder law attorney or financial planner with experience helping senior clients before making any big decisions. Not only will a local attorney or financial advisor be able to help you create a Medicaid Asset Protection Trust in line with all relevant state and federal guidelines, but they will also be able to help assess your senior loved one’s entire financial picture to determine how best to protect their assets and look after their care as they age. 

To learn more about how Sunbound can help make paying for senior living and senior care more affordable for you or your senior loved one, send us an email at info@sunboundhomes.com or request more information on Sunbound. Sunbound is the best way to pay for senior living and senior care, and we’re on a mission to make senior living and senior care more affordable for everyone.