Medicaid Asset Protection Trusts, Explained

Studies have shown that almost 70% of adults turning 65 will need long-term care at some point during their lifetimes. While long-term care is an amazing resource to many Americans and their families, it is also extremely expensive and can cost around $266/day in the state of Alabama. However, if you are eligible, Medicaid can help pay for long-term care. While Medicaid’s income and asset restrictions are strict, there are estate planning tools—like the Medicaid Asset Protection Trust—that can help you qualify for Medicaid, while also preserving your life savings. 

What is a Medicaid Asset Protection Trust? 

A Medicaid Asset Protection Trust (MAPT) serves to protect your assets if you or your spouse needs long-term care. A MAPT is designed to help you avoid draining your assets if you don’t have long-term care insurance, but need to pay for nursing home care. 

Medicaid pays for long-term care, but it can be difficult to qualify…which is where the MAPT steps in to play. To qualify for Medicaid, the state will generally look at your income and assets.   If you’ve worked hard to obtain a healthy savings account and own your home, you may not qualify, unless you spend down your assets. A MAPT, however, allows you to avoid that potential scenario. 

How Does a Medicaid Asset Protection Trust Work?

A MAPT is a type of irrevocable trust, which means that once you place your assets in the trust you cannot take them back out. The type of assets you can include in a MAPT are:

• Savings Account
• CD’s
• Investments accounts
• Cash value life insurance policies
• Your primary home and other real estate 

Benefits of a MAPT

The main benefit of a MAPT is that it protects those assets placed into the trust so they are exempt when you attempt to qualify for Medicaid. When a couple has to spend-down their savings and assets, this can shrink the size of the estate that is left to a surviving spouse or family members. Selling off assets can also have certain tax implications if you’re required to pay capital gains on the sale. A MAPT allows you to avoid these situations. 

Special Considerations to Keep in Mind

While MAPTs are put in place to help you protect your assets in order to qualify for Medicaid, it’s important to remember the look-back period. The look-back period for Alabama is 60 months prior to your Medicaid application date. So, if you want to use a MAPT to protect your assets, then it’s wise to create one sooner rather than later. 

Another important consideration is that this type of trust is irrevocable, which means that once assets are placed in the trust, they cannot be taken back. It is vital to ensure that you are comfortable with the permanent transfer of your assets into this trust. 

Talk with an Estate Planning Attorney

Everyone has a unique financial situation and estate planning needs, so it is extremely important to talk to an estate planning attorney who can help you understand all of your options, and which may be best for you, your family, and your assets. 

If you have questions about creating a Medicaid Asset Protection Trust—or an estate plan altogether—we encourage you to contact Miller Estate & Elder Law at (256) 251-2137 or register for one of our free estate planning workshops.

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