Medicaid is both a federal and state program that will cover the cost of long-term care either at home or in a nursing home. However, only those that meet certain income and asset limits are eligible for Medicaid benefits. It is possible to become eligible by removing certain assets from your name, however, in the large majority of cases, if the transfer of assets is done within two and a half years (for home care) or five years (for nursing home care) of your Medicaid application, such transfers will cause you to be ineligible for a period of time, during which you must pay for the staggering costs of your own care.
Because of the nature of the Medicaid application process and the “look back,” it is important to speak to an elder law attorney about your options well before you think you may require long-term care. One of the most powerful things you can do when planning for your future needs is to establish a Medicaid Asset Protection Trust. A Medicaid Asset Protection Trust (“MAPT”) is an important tool used by estate planning and elder law attorneys to assist their clients in qualifying for Medicaid while at the same time preserving a lifetime of work and asset accumulation.
Assets placed in a MAPT will not count as assets for Medicaid eligibility purposes and Medicaid cannot seize the Trust’s assets so long as the Trust was created and funded for the appropriate time before your application for Medicaid. In many families, the home is their largest asset and it is also the simplest asset to transfer to a MAPT. By signing a new deed transferring ownership to the MAPT, you can preserve the value of your home in the event that either you or your spouse ever require care in a nursing home or from a home health aid. When you transfer ownership of your home to the MAPT you can retain the right to live in the house for your lifetime and you will retain any real estate tax exemptions you currently receive such as the Enhanced STAR benefit or the Veterans Real Estate Tax Exemption. Transferring your home to the Trust would not prevent you from downsizing in the future - the MAPT would simply sell your current home and purchase the new one - and therefore a future desire to move wouldn’t inhibit your ability to begin the process of long-term care planning.
The MAPT is the preferred option of elder law attorneys when it comes to protecting the family home. Clients often ask if they can simply transfer the house directly to their child or children. While this can be done, there are inherent risks in this method including the fact that the home will be considered the child’s asset and would be subject to their own financial creditors or even at risk in the event of a child’s divorce from their spouse. Transferring the house directly to a family member will also typically result in the loss of your real estate tax exemptions and the loss of a step up in basis for your children, which can cost them tens, if not hundreds, of thousands of dollars in taxes.
In addition to their home, clients can also consider transferring some of their investments into the MAPT. When transferring investment accounts, clients can continue to receive the income from the investments, but you will no longer be able to access the principal. Because the MAPT needs to be irrevocable to be effective, it is important to think closely about what and how much of your assets you place into the MAPT. It is often a balancing act between placing enough assets into the Trust so that you are protecting your hard earned funds, but at the same time retaining enough to comfortably enjoy your life. It is important to note that your qualified retirement accounts such as 401Ks and IRAs are not considered assets for Medicaid eligibility purposes and you do not need to think about transferring them to your MAPT.
The MAPT has a significant advantage over outright transfers to family members in that when you place your assets in Trust, you may decide who your Trust beneficiaries are while you are alive and you may reserve the right to change those who will ultimately inherit the Trust assets upon your death.
The Law Offices Of Roman Aminov Is a NYC & Queens Based Probate & Estate Planning Attorney That Has Been Recognized As an “AVVO Perfect 10 Superb Firm. Call us today at 347-766-2685 to discuss your long-term care planning needs.
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