Medicaid Asset Protection Trusts

You may have assets you want to protect and pass on to your loved ones. But you might worry that you or your loved ones will need expensive long-term or nursing home care that may require spending your or their hard-earned wealth. Although Medicaid can cover the cost of your long-term care, you must spend any assets above the applicable resource limit on your care before you are eligible for Medicaid benefits. However, a Medicaid asset protection trust (MAPT) allows you to preserve your assets for your family while ensuring your eligibility for benefits.

If you have questions about whether you or a loved one should set up a MAPT, reach out to Amoruso & Amoruso LLP for help. Our attorneys have nearly 60 years of combined legal experience in estate planning, elder law, Medicaid, and long-term care planning. As a premier law firm for innovative comprehensive estate planning in New York and Connecticut, we have the insight and knowledge clients need to navigate life’s challenges.

If you already have a MAPT in place, allow Amoruso & Amoruso LLP to give it a thorough review. We’ll identify any areas that could use revisions or corrections and advise you on options for making it better based on your individual goals. Be assured that, if no changes are needed, we will tell you and you will have the peace of mind that your plan accomplishes your objectives.

Contact Amoruso & Amoruso LLP today. A New York Medicaid asset protection trust lawyer may be able to help with your situation and offer the best advice and service.

What Is a Medicaid Asset Protection Trust?

A Medicaid asset protection trust is an irrevocable trust created to protect your assets from getting spent on long-term home care or nursing home care.

With an irrevocable trust, you transfer property ownership to the trust. That way, Medicaid will not consider the property in the trust to be owned by you, the trust maker or grantor. However, there are certain powers that a trust maker in New York can reserve to continue to use certain assets placed in the trust and enjoy income generated from trust assets while giving you peace of mind that your assets are protected.

Why Do I Need a Medicaid Asset Protection Trust? Can’t I Just Give My Assets Away?

You must meet the Medicaid program’s resource limit requirements to be eligible to apply for Medicaid benefits. Medicaid applicants cannot have income and assets that exceed certain thresholds.

Applicants with excess assets cannot qualify for nursing home or home care Medicaid. Most importantly, however, as a nursing home Medicaid applicant, you cannot “give away” your property to qualify for benefits. Medicaid employs a five (5) year “lookback” rule to see if you made non-exempt transfers of assets. The state will conduct a “five-year lookback” when reviewing a nursing home Medicaid application. The lookback checks whether you have disposed of or transferred away assets without receiving adequate compensation for those assets. The Department of Social Services deems such transfers to have been made solely to qualify for Medicaid benefits. If so, a period of benefit ineligibility will be imposed based on the value of the transfer, which would require you to privately pay for all of your long-term care expenses during that timeframe. It should be noted that while New York currently does not use a lookback period for home care Medicaid, the law provides for a thirty (30) month lookback period to begin in New York on March 31, 2024, unless that law is repealed.

Non-qualifying transfers usually include any transfers of assets for less than fair market value. These include “gifts” to family members, charities, and friends. With a sound Medicaid Plan that takes into account any applicable lookback period, a Medicaid asset protection trust provides a tool for you to transfer ownership of your assets to fall within the nursing home Medicaid resource limits without incurring a coverage penalty period and protecting those assets from Medicaid.

How Does a Medicaid Asset Protection Trust Work?

For an effective MAPT, you must set up and fund an appropriately drafted irrevocable trust and not apply for Medicaid benefits until the applicable lookback period expires. Funding the trust means that you transfer ownership of assets you wish to protect from long-term care costs, such as a house or investments, into the MAPT.

Although the MAPT will now own those assets, in New York, a properly drafted trust may allow you to receive income, but not principal, from any investments in the trust, and you can continue to live in your home. At your death, the assets of the trust will be distributed to your named beneficiaries pursuant to the terms you state in the MAPT. It is important to stress that you will not be able to use any of the principal you place into the trust.

If you do not apply for Medicaid nursing home or home care services until after the applicable lookback period, Medicaid cannot consider those assets as owned by you. Also, pursuant to the Medicaid laws, when you set up the trust, you must name someone other than yourself or your spouse as the trustee. In most cases, an adult child, a financial advisor, or an attorney will be named as trustee of the MAPT.