A Medicaid Asset Protection Trust (MAPT) is one tool among many that could prepare you for the future. But is it the right tool for you?
What Is a Medicaid Asset Protection Trust?
A MAPT provides the resources you need to afford nursing home care in the future. If you don’t have long-term care insurance, you could be stuck paying thousands of dollars a month for long-term care. If you qualify for Medicaid, you could have it cover those costs. The problem is that most of us have assets that disqualify us from Medicaid.
A MAPT can be an effective tool to have Medicaid cover your nursing home expenses without needlessly depriving yourself. It allows you to place assets in a trust so you can meet Medicaid requirements and pay for long-term care.
4 Advantages of a Medicaid Asset Protection Trust
There are four main advantages to having a MAPT that covers your long-term care payments in the future.
1. Pays for Long-Term Care and Protect Your Assets From Being Lost to Others
A MAPT is an “irrevocable trust”. So, any property you transfer into it does not belong to you and cannot be taken back for any reason. Medicaid cannot count it as an asset of yours. Plus, it cannot inadvertently be transferred to someone you do not wish to transfer it to.
Say you transfer your house to your adult child to keep it in the family and qualify for Medicaid. If, after three years, you need nursing home care and want Medicaid to cover expenses, you’ll be out of luck. Medicaid looks back to any assets you had and transferred. So, it will consider your old house as a qualifying asset and deny you benefits.
In addition, if your child files for bankruptcy or divorce, they could lose the house to creditors or their ex. They could even use the house as collateral on a loan and lose it that way.
2. Has Tax Benefits and Protects You From Having to Reimburse Medicaid
You could avoid your child losing the home that you transfer to them by keeping a life estate in it. But, if you receive Medicaid and your child sells the home, you’ll need to reimburse Medicaid the life estate’s value.
If you keep a life estate in your home, you’ll also lose a portion of your capital gains tax exclusion. On the other hand, a MAPT will maintain your capital gains tax exclusion for your whole primary residence.
Plus, with a MAPT, the equity in your home from appreciation over time will generate a higher cost basis. As a result, your capital gains taxes upon the sale of the home will be reduced or eliminated.
3. Lets You Continue Using Your Property and Income
A MAPT gives you the ability to continue using property you put in the trust. This means that if you place your house into a MAPT, you can continue living in it. You can also sell a home you put in a MAPT and purchase another in the trust’s name. While you cannot sell investments in a MAPT, you can collect income from them. All without risking your ability to qualify for Medicaid as a means of paying for long-term care.
4. Allows You to Control Your Assets Without Keeping Them
As an irrevocable trust, you must relinquish ownership of property you put into a MAPT. However, you will still have the ability to control them. Even though your MAPT trustee technically controls its assets, you have the authority to change them. Typically, a MAPT trustee will be discharged when the MAPT owner thinks its assets are not managed properly.
Contact Us to Learn More About Whether a Medicaid Asset Protection Trust Is Right for You
A Medicaid asset protection trust is only effective if it is created properly. You need the help of an experienced Indianapolis asset protection attorney to make sure your MAPT serves your long-term care needs. Contact Barnes Cadwell Law to learn more about your options, including MAPT.