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What Is a Medicaid Asset Protection Trust?

Medicaid Asset agent hands over piggy bank for protection and care.

Long-term care is prohibitively expensive for many people. Medicaid and other needs-based programs can help pay for long-term care, but their standards for eligibility can be difficult to meet without planning. Dumping assets to qualify for Medicaid can create more problems than it solves. Legal solutions are available for people hoping to qualify for Medicaid despite being above the asset limit, including the Medicaid Asset Protection Trust. Continue reading to learn about Medicaid Asset Protection Trusts and how such a trust might help you or your family. Reach out to an experienced West Palm Beach Medicaid planning and asset protection attorney with any questions.

Medicaid’s Strict Requirements and the Five-Year Lookback

Qualifying for Medicaid usually requires expert legal advice. Applicants must have a sufficiently low income as well as very few assets. But with planning assets may be able to be protected. The rules appear strict. As of 2023, an applicant in Florida must earn less than $2,742 per month and have assets worth less than $2,000 to qualify for home health, Assisted Living or nursing home Medicaid. Different limits apply to married couples. However, there are solutions and strategies that may apply to address these negative rules.

Some applicants believe they can, on their own, skirt the income and asset limits by getting rid of assets before applying for Medicaid (e.g., gifting assets to their kids). Medicaid, however, reviews all asset transfers made by the applicant within the prior five years (the “Lookback Period”). Transfers for less than market value (gifted or sold for less than market value) during the Lookback Period will result in a penalty period of Medicaid ineligibility. Gifting and other strategies may be done but should be with the advice of an attorney who specializes in Medicaid planning.

Medicaid Asset Protection Trusts Protect Your Assets–From Medicaid

One strategy is a Medicaid Asset Protection Trust (MAPT), which allows Medicaid applicants to protect certain assets without affecting their Medicaid eligibility, as well as to protect those assets from later collection. Not all asset protection trusts are Medicaid-compliant; an asset protection attorney can help ensure that your trust is a proper MAPT.

Assets transferred to the MAPT within the appropriate time frame and in the appropriate manner will be excluded from Medicaid’s eligibility calculations. The trust must be irrevocable, meaning once the assets are transferred to the trust, they cannot be withdrawn by the beneficiary. Assets must be transferred to the trust more than five years prior to applying for Medicaid to avoid any lookback penalties. If transfers are made and Medicaid is needed in fewer than five years, additional strategies will be used.

The trust assets are no longer technically owned by the person who established the trust; instead, they are owned by the trust itself. Thus, they will not be counted as the person’s assets. Nor will they be reachable by any creditors, including Medicaid.

Moreover, income generated by the trust can be distributed to the Medicaid recipient and their spouse without affecting Medicaid eligibility. Neither the recipient nor their spouse may draw from the trust’s principal. However, the trustee can be empowered to withdraw principal and give it to other people, who can in turn spend those funds on the Medicaid recipient. The Medicaid recipient can even transfer their home to the trust and continue living in that home for the remainder of their life.

Ultimately, the principal trust assets will pass to the beneficiary’s heirs at the time of their death. The assets pass directly without the need to go through probate.

Call Shalloway & Shalloway, P.A., to Plan for Asset Protection, Special Needs, Long-Term Care, and Medicaid Qualification

An experienced West Palm Beach elder law attorney can help you and your family plan appropriately to maximize your chances to qualify for Medicaid and other needs-based governmental programs, while protecting your assets from collection upon your passing. If you are in need of a dedicated, thorough Florida asset protection and elder law attorney, contact the seasoned West Palm Beach elder law attorneys of Shalloway & Shalloway at 561-686-6200.

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