How Does a Medicaid Asset Protection Trust Work?

A Medicaid Asset Protection Trust (MAPT) is an invaluable tool when it comes to Medicaid and long-term care planning. Essentially, this specialized trust safeguards a prospective Medicaid applicant’s wealth and assets from being counted towards the program’s asset limit. Medicaid is a federal program that is designed to provide healthcare for individuals with limited incomes, close to the federal poverty level. As such, many people do not qualify due to excess assets. However, these same people cannot afford to cover long-term care expenses on their own. MAPTs exist as a means of providing a path towards receiving much needed Medicaid benefits. At Morgan Legal Group, P.C., our attorneys are experts at developing strong planning strategies for applying to Medicaid and receiving long-term care benefits. As a federal program, the Medicaid application process can be complex, and the program’s stringent policies means that any deviation from their eligibility standards can leave a person without the healthcare they need. This is why it is so important to consult with a qualified Medicaid planning attorney who has an in-depth understanding of how to implement a Medicaid Asset Protection Trust in order to ensure that both assets and healthcare needs are secured.
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If you or a loved one is considering applying to Medicaid, reach out to Morgan Legal Group, P.C. first to determine whether a Medicaid Asset Protection Trust can help with your eligibility and safeguard your assets.
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Questions And Answers

When it comes to Medicaid, eligibility standards can vary as every state administers the program differently. However, regardless of what state an applicant resides in, the application process can be highly complex, in particular when looking at Medicaid’s asset limits. Asset limits refer to the amount of assets an applicant is permitted to own while still remaining eligible for the program. With Medicaid, different groups are assigned corresponding asset limits. In general, for seniors who are 65 years of age or older, their income cannot exceed $2,382 per month. However, it should be noted that there are different types of Medicaid benefits available that set different asset limits. For example, to be eligible to receive home care through Aged, Blind and Disabled Medicaid, the asset limit is around $794 in half of the states. The other half has their ABD Medicaid asset limit set at around $1,073. Furthermore, these figures apply to single applicants. Married applicants must follow another set of financial eligibility criteria. As previously mentioned, eligibility standards can be confusing. Medicaid applicants are highly encouraged to consult with an attorney who specializes in Medicaid and long-term care planning.
A Medicaid Asset Protection Trust (MAPT) is specifically designed for individuals who are looking to apply to Medicaid but exceed the program’s asset limits. Placing their surplus assets into a MAPT can help guarantee that they will fall under Medicaid’s eligibility threshold. This is because MAPTs function the same way as irrevocable trusts. That is to say, the assets and funds that are placed within the MAPT by the trustor, are no longer considered to be owned by the applicant. As such, those assets cannot be counted towards the applicant’s asset limit. In addition, just like an irrevocable trust, assets placed in a MAPT cannot be taken out by the trustor, nor can the MAPT itself be altered or terminated by the trustor. Also, in regards to the management of a MAPT, an applicant’s spouse cannot be named as the trustee and while children or other relatives can designated as a trustee, they are prohibited from utilizing the funds in the trust. These terms help to ensure that the trust is fully compliant with Medicaid’s eligibility standards.
A Medicaid Asset Protection Trust works to reduce an applicant’s countable assets in order to be eligible for Medicaid benefits and also helps secure those assets for the future. A MAPT allows trustors to appoint beneficiaries to become the recipients of those assets when the trustor passes away. Hence, the assets do not have to be liquidated to cover long-term care expenses when an individual first applies to the program. In addition, the assets remain protected even after the trustor’s death. Medicaid estate recovery may attempt to recoup the costs of program benefits made to a Medicaid recipient through any assets they may own. However, assets placed in a MAPT are no longer owned by the trustor, but rather the beneficiaries, making those assets inaccessible to any state collection attempts.
As with any financial planning tool, a Medicaid Asset Protection Trust might not be right for everyone. There are a number of factors to consider when determining whether creating a MAPT will be beneficial. Timing, for instance, is a crucial point to review. MAPTs cannot be drafted if an individual is looking to apply to Medicaid within five years. Medicaid has what is called a “look-back period” in which the program checks to see if an applicant made any gift or asset transfers for the purpose of meeting Medicaid’s asset limit. Creating a MAPT within this timeframe would result in a penalty period, leaving the applicant ineligible for Medicaid for a certain amount of time. Another factor that needs to be carefully evaluated is whether the total amount of an applicant’s assets warrants the creation of a MAPT. These types of trusts can cost between $5,000 to $10,000 to set up. Because of the fees associated with these trusts, it is recommended that other Medicaid planning options be explored for assets valued at less than $100,000.