Moving into a nursing home can be expensive! For example, it can cost you about $5,000 a month for an assisted living facility in Lynchburg! The cost is up to $8,400 a month for a private room according to Genworth Cost of Care. This expense can quickly wipe out your life savings. Medicaid will pick up the bill for you, if your income and assets are low enough to qualify for Medicaid benefits. The most common misconception, however, is that most everyone thinks you typically have to be nearly destitute, before you can qualify for Medicaid.
If you put your assets into a Medicaid Asset Protection Trust, however, you might be able to qualify for Medicaid, even if your assets exceed the limit. Here is what you need to know about a Medicaid Asset Protection Trust (MAPT).
Medicaid Income and Asset Limits
Eligibility for Medicaid varies by state, and you can view a quick reference for various types of Medicaid eligibility in Virginia based on a senior's assets. In general, you must have little or no income and few countable assets. Each state also has non-economic requirements, such as age, disability and household size, depending on your circumstances.
Medicaid does not count all of your assets toward the asset limit. For example, if you or your spouse live in your primary house, Medicaid considers the home an exempt asset. The value of that property does not count toward your state’s asset limit. There are limits on the amount of equity that does not count. The limits vary from state to state.
Additional examples of assets that can be exempt, include one car, term life insurance, household furnishings, clothing, wedding and engagement rings and other personal items. Medicaid does not count prepaid funeral and burial plans or life insurance policies with little cash value toward the limit.
Medicaid does count these things toward the asset limit:
- Cash
- Bank accounts
- Investments
- Vacation homes
- Retirement accounts not yet in payout status (only in some states)
These are just general guidelines. The state of Virginia’s treatment of assets might differ, which is why it is essential to work with an experienced and certified estate planning attorney like Robert W. Haley.
How a MAPT Works
When you put your assets into a Medicaid Asset Protection Trust (MAPT), Medicaid does not count those things toward the asset limit. in a MAPT situation, you do not own those items - the trust does. Medicaid does not count an asset that does not belong to you. The trust can protect the assets for distribution one day to your beneficiaries.
Please note that a “Medicaid Asset Protection Trust” can also go by the name of “Medicaid Planning Trust,” “Home Protection Trust,” or “Medicaid Trust.” Make sure that the trust you select is Medicaid-compliant. Most revocable living trusts, family trusts, irrevocable funeral trusts, and qualifying income trusts (QITs, also called Miller trusts) are not Medicaid-compliant. They will not protect your assets, if you want to be eligible for Medicaid to pay for a nursing home!
Essential Aspects of MAPTs
MAPTs are sophisticated estate planning documents. Here are a few of the highlights of these documents:
- You cannot create a MAPT and immediately apply for Medicaid. You will have to wait at least five years before you apply for Medicaid, after setting up a MAPT. If you apply for Medicaid before the “look-back” period expires, you could face harsh financial penalties.
- You are the grantor of your trust. Your state might use a different term, like the trust-maker or settlor. Your spouse cannot be the trustee of your MAPT, but your adult child or another relative can be.
- The trust must be irrevocable. Once signed, you can never change or cancel the trust. You can never own those assets again. If you create a revocable trust, Medicaid will count all the assets in that trust toward the asset limit, because you still have control over the assets. A revocable trust is for money management purposes only, not asset protection!
- The trustee must follow the instructions of the trust. No funds of the trust can get used for your benefit.
- A MAPT protects your assets from Medicaid estate recovery. Without a MAPT in place, after you die, the state could seek reimbursement from your estate for all the money they paid out for your long-term care costs!
- While a Miller trust will not protect your assets, it can protect some of your income, if your income exceeds the limit for Medicaid. Used with a MAPT, many people can qualify for Medicaid to help pay for the nursing home, even if their assets and income exceed the eligibility limits.
- The rules for MAPTs vary from one state to the next.
Keep in mind that the regulations are different in every state. To find out what you need to know about a Medicaid Asset Protection Trust (MAPT) in Virginia, reach out to us! Schedule a free call with our elder law team in Lynchburg to see how you can begin proper planning now with solutions like a Medicaid Asset Protection Trust to acquire help for long-term care costs and protection for your hard-earned assets and life savings.
References:
American Council on Aging. “How Medicaid Planning Trusts Protect Assets and Homes from Estate Recovery.” (accessed May 19, 2023) https://www.medicaidplanningassistance.org/asset-protection-trusts/
American Council on Aging. “How to Spend Down Income and/or Assets to Become Medicaid Eligible.” (accessed May 19, 2023) https://www.medicaidplanningassistance.org/medicaid-spend-down/
