It is estimated that about half of all people in the U.S. aged 65 and older will need some form of long-term care—and one-third will need a full-time skilled nursing facility—in their lifetimes. Given these projections, it’s a good idea for everyone to plan for the possibility of needing this kind of care one day.
While you might feel pretty well taken care of by Medicare right now, it’s important to understand that Medicare will not pay for long-term care beyond the first 100 days. Medicaid, however, will pay for a nursing home, but only for people who meet the income and asset limitations. For people who are financially between being able to afford a nursing home with their own income and savings and qualifying for Medicaid to pay for it, there are some steps you can take to make sure you get the care you need, but you might have to act fast.
What Is a Medicaid Asset Protection Trust?
To qualify for Medicaid, your personal liquid assets cannot exceed a few thousand dollars. If they do, you will have to use the assets to pay for your long-term care until they run out. At that point, you could qualify for Medicaid. However, that means you will not be able to leave anything to your children and grandchildren in your Will. One way to preserve these assets and still qualify for Medicaid to pay for a nursing home is to create a Medicaid Asset Protection Trust (MAPT). This is an Irrevocable Living Trust that names someone other than you as the beneficiary. If the time comes that you need a nursing home, the assets held in the Trust will not count against you when applying for Medicaid. Instead, they will be passed on to the beneficiaries you have named upon your death.
Pros and Cons of Medicaid Asset Protection Trusts
Whether a MAPT is right for you is a matter you should discuss with an Estate Planning Attorney. These Trusts offer some advantages, but there are also several disadvantages, and they are definitely not for everyone. On the plus side, as we have mentioned, it is a way to qualify for Medicaid assistance to pay the extremely high cost of a quality nursing home while preserving an inheritance for your loved ones. These assets are protected from Medicaid asset recovery after your death as well. For many people, these pros are outweighed by the following cons:
- Once your assets are in the Trust, they no longer belong to you. That means you cannot access them to pay for goods and vacations, give as gifts, or help a grandchild with college tuition.
- Because the Trust is irrevocable, you cannot change the terms if you later decide you need the money now.
- There are significant fees associated with setting up a Trust, so it’s only cost-effective for people with substantial savings and assets.
- Medicaid has a five-year look-back period when determining your eligibility for benefits, so your MAPT has to be set up more than five years before you need a nursing home. That means losing access to the bulk of your savings without knowing for sure whether you will ever even need a nursing home.
When you discuss Medicaid Asset Protection Trusts with your Estate Planning Attorney, they will help you weigh the pros and cons for your specific situation.
A MAPT Might Be Part of Your Comprehensive Estate Plan
Trusts are just one piece of the Estate Planning puzzle. When you meet with the team at Ross & Shoalmire to discuss your long-term goals for your assets, they will go over all of your options for planning for long-term care. Along with a Will, Powers of Attorney, and Revocable Living Trusts, they will discuss the best way for you to plan for the possibility that you will one day need a nursing home. If a MAPT is right for you, they will make sure you understand exactly how it works and execute one that will serve its purpose when the time comes.
It’s never too soon to think about protecting your assets from the high cost of a nursing home. Contact one of our offices in Texas or Arkansas to get started today.