The cost of nursing home care continues to increase in New York, averaging $112,420 per year in upstate New York. Medicare and the majority of private insurance policies don’t cover long-term nursing home stays. One way to protect your assets while qualifying for long-term care coverage through Medicaid is to use a Medicaid trust.
Medical emergencies and illnesses can happen at any time. Many New York residents are not prepared to pay for a nursing homestay. Creating a Medicaid trust will allow you to be prepared to qualify for Medicaid should nursing home care become necessary. The experienced estate planning lawyers at CDH Law PLLC can help you create a Medicaid trust to protect your assets. Contact us today to learn more about the benefits of using a Medicaid trust.
What Is a Medicaid Asset Protection Trust (MAPT)
A Medicaid Asset Protection Trust (MAPT) is a type of irrevocable trust that cannot be canceled or revoked. MAPTs are used to help individuals qualify for Medicaid eligibility. Medicaid provides recipients with insurance coverage for long-term nursing home stays. Qualifying for Medicaid is not easy, however. You must have minimal income and resources to qualify. Any assets you transfer into a Medicaid Asset Protection Trust will not count as income or assets to be eligible for Medicaid benefits.
In a revocable living trust, you, as the owner, will maintain ownership of the assets you transfer into the trust while you’re still living. On the contrary, with a Medicaid Asset Protection Trust, the assets you no longer own the assets you transfer into the trust. The trust owns your assets, even though you still control the assets.
Naming a Trustee in Your Medicaid Asset Protection Trust (MAPT)
The grantor of a trust must appoint one or more trustees to manage the trust assets on behalf of the beneficiaries. In an irrevocable trust, you can appoint yourself as the sole trustee. In a Medicaid Asset Protection Trust, you must appoint an independent trustee other than yourself or your spouse to manage the trust assets. Many people appoint a trusted close friend or adult child to be their independent trustee. You will be able to change your independent trustee later if you need to do so.
Transferring Your Assets Into a Medicaid Asset Protection Trust
Many of our customers are understandably concerned about whether they’ll be able to keep their homes and still qualify for Medicaid benefits. You will need to transfer your primary residence (home) into your MAPT, but you will still live in your home. You may even decide to sell your home that the trust owns or buy a new home in the trust’s name without losing the trust’s asset protection value. Your heirs may save on capital gains taxes by transferring ownership of your home into a MAPT. The cost basis for capital gains taxation occurs at the time of your death, not from the time of your initial purchase.
You can transfer your income-producing assets into your MAPT, such as your stocks and bonds. You will still be able to use any income they produce or sell the income they generated. However, you won’t be able to touch the principal on your stocks and bonds because the trust owns the principle. You will still be able to control your assets even though you no longer own them.
Medicaid’s Look-Back Period
Many people plan on putting off Medicaid planning until they need to move into a nursing home. Unfortunately, waiting to engage in Medicaid planning can have problematic effects. Medicaid has a five-year look-back period. You will need to create your Medicaid Asset Protection Trust five years before the time you’ll need to qualify for Medicaid. If you create the trust too soon, the assets you transfer into the trust will count against you to be eligible for Medicaid.
Should You Use a MAPT Instead of Giving Your Assets to Your Children?
Sometimes our clients assume that they’ll be able to give their assets to their adult children so they can qualify for Medicaid. However, there are many reasons transferring ownership into a MAPT is preferable to gifting your assets to others. For example, you may think that transferring your home’s title to your child will help you both. However, if you decide to apply for Medicaid three years after you transfer the title, Medicaid will look back at your past transfers and deny your application.
When you transfer your home directly to your child or loved one, other problems can occur. Your adult child could get divorced and lose half of the home’s equity after the divorce. Or, if your adult child obtains a significant amount of credit card debt, creditors may try to get your house to collect payment. We’ve also seen cases in which the adult child decides to mortgage the house for cash. When you transfer your home into a MAPT, you can rest assured that your house and other assets will be protected against creditors or embittered spouses.
It may be possible for you to effectively transfer your home to your child using Mediaid’s Child Caregiver Exception. You should discuss the pros and cons of using this exception instead of transferring your assets into a MAPT. Before you proceed, it’s wise to speak to an experienced estate planning lawyer who can discuss the pros and cons of creating a MAPT to qualify for Medicaid.
Contact a Medicaid Trust Lawyer in Syracuse Today
Do you think you’ll benefit from a Medicaid Asset Protection Trust? If so, the Syracuse estate planning lawyers at CDH Law PLLC are here to help. Our estate planning lawyers have an in-depth understanding of the rules related to qualifying for Medicaid. We will carefully consider your unique situation to create an effective long-term care plan that works for you and your family. Contact us today to schedule your initial consultation.