What is a Medicaid Asset Protection Trust (MAPT)? A Medicaid Asset Protection Trust is a specific form of trust that is created to more easily qualify an individual to receive Medicaid long-term care coverage. An individual who needs long-term care may transfer his/her assets into the MAPT and those assets will not disqualify the individual from receiving Medicaid long-term care.
Many people do not realize that the government program, Medicare, will not pay for long-term care at home assistance or stay at a long-term care facility. Instead, individuals are expected to either pay for this service out of pocket, or if the individual does not have sufficient assets, the government program Medicaid will step in to pay for the long-term care treatment. Some people are able to pay for long-term care treatment out of pocket, despite the often-high costs associated with such treatment. But for the majority of people, the payments are simply too expensive, and would leave the treatment recipient’s family destitute.
Each state has a state Medicaid agency. Qualification for Medicaid long-term care depends on both the Federal Medicaid rules and the state specific Medicaid rules. Our law firm is located in Lake County, Illinois, and thus this article will address Illinois specific Medicaid rules.
In Illinois, ownership of your primary residence does not disqualify you from Medicaid provided it is worth less than $713,000, and you intend reside at the property in the future. Further, one family car is exempt. In terms of cash, investments, retirement plans, the recipient of Medicaid long-term care cannot have more than $17,500, and if married, the other spouse cannot have more than $120,780 in assets other than the home and car. Further, there are monthly income limitations as well that may reduce the amount of Medicaid benefit available.
These rules leave many middle-class families in a bind. They may find that they do not have enough money to cover the exorbitant long-term care costs facilities charge out of pocket, but that they also have too much in the way of assets to qualify for Medicaid coverage. There are multiple options available for families in this category, but those options will depend on how soon the individual needs long-term care. For families who are planning at least 5 years out from needing long-term care, a Medicaid Asset Protection Trust may be the best answer.
A trust is a formal agreement, similar to a contract, whereby the trust grantor transfers asset to a trustee, to hold those assets for the benefit of the trust beneficiaries. The trust is a written agreement that appoints a trustee, names the beneficiaries, and outlines the rules of asset distribution. Trusts can be either revocable, which means the grantor can change the trust whenever the grantor wishes, or the trust can be irrevocable, meaning that once it is set up the trust is immutable. Medicaid Asset Protection Trusts are required to be irrevocable in order to not be counted as an asset of the grantor. The trustee and beneficiaries of the trust must not be the grantor or the grantor’s spouse. Typically, parents will name their children as beneficiaries and the children or a third party as trustees of the MAPT.
Once a MAPT is established, the family transfers assets into the MAPT by retitling assets. This transfer is considered a gift. Medicaid rules state that gifts cannot be made to third parties within the 5 year lookback period, otherwise it will disqualify the individual from receiving Medicaid long-term care coverage. This is why it is important to establish the MAPT at least 5 years before an individual will need Medicaid.
Once assets are transferred into the trust, the trustee manages those assets for the benefit of the beneficiaries. There cannot be any agreement between the trustee/beneficiaries and the grantor(s), to return any assets to the grantor. If there is an agreement, the assets of the MAPT will be considered assets of the grantor and will likely disqualify the grantor from receiving Medicaid.
Provided the procedures above have been met, when it comes time for the individual to apply for Medicaid long-term care, the assets in the Medicaid Asset Protection Trust will not be counted against the individual and will not be required to be spent down or otherwise claimed by Medicaid.
Johnston Tomei Lenczycki & Goldberg LLC strives to assist families in their estate planning, including potential Medicaid planning. If your family may be facing long-term care needs, it is important to speak with our Medicaid attorneys today to discuss estate planning options to maximize the Medicaid benefit. It is important not to delay in this planning as the timing must be right in order for the plan to be successful. If your family is in need of estate planning and Medicaid planning, contact our office at 847-549-0600 today.
Phone Number: (847) 549-0600
Fax Number: (847) 589-2263
350 N. Milwaukee Ave., Ste. 202
Libertyville, IL 60048
2100 Manchester Road, Suite 920
Wheaton, IL 60187