By If you’re thinking of estate planning, then investing in a Medicaid asset protection trust is a long way to go. Transferring these trusts qualifies you for Medicaid on a long-term basis and also doesn’t make a dent in your savings.
However, you might be wondering and feeling out of the blue what is a Medicaid asset protection trust. Well, don’t worry we have got you covered.
This comprehensive blog will be your guide all the way to know about Medicaid and its asset protection system. Be it a long-term insurance plan, or a simple estate plan, Medicaid has got you covered!
What is Medicaid?
Medicaid is the US’s primary medical program that helps you out with extensive coverage on healthcare and other estate planning services. It has empowered more than 90 million people belonging to the low-income group.
Even though Medicaid faced considerable challenges to support low-income groups during the COVID-19 pandemic; they speedily recovered their rates by 2023.
By 2023, Medicaid has millions of enrolees which was a good start for them that also largely facilitated them as well. With this, Medicaid aimed at fostering coverage continuity. They also widely focused on closing the coverage gap between the states. The Biden government has played a major part in this and has expanded Medicaid under the Affordable Care Act.
What is Medicaid Asset Protection Trust (MAPT)?
As we delved into the roles and regulations of Medicaid, we now need to tell you about what their asset protection policies actually entail.
The MAPT is an esteemed planning strategy coined by Medicaid. This strategy meets Medicaid’s asset limits when an applicant has excess assets.
In layman’s terms, MAPT protects your assets from being counted. MAPT enables your assets to qualify for a long-term care plan. It safeguards it from any form of depletion.
However, in order to qualify for MAPT, your assets must be kept under a certain level. These asset levels are strict and also entail a five-year look-back period to see your qualifications to still hold the assets.
Medicaid asset protection trust won’t penalize you for transferring the assets.
Importance of MAPTs
MAPTs became extremely crucial during the COVID-19 pandemic. In 2023, it gained a huge prevalence and now every state has adopted it to cater to the low-income group.
The Biden government has also been extremely flexible with this. They have allowed each state to tailor their own by-laws about MAPTs, adhering to the larger guidelines.
For example, if an elderly woman applies for a long-term care plan for $2000, then the asset limit could be lowered. The asset limit could be lowered depending on the state you stay in. So, make sure to always check out the limitations and guidelines of Medicaid in each state.
While some assets are highly valued, like one’s home or primary residence, there are some assets that don’t exhume that much of a value.
Remember, Medicaid is something that is tailored only for low-income groups primarily, hence the assets of MAPTs have to be substantially spent down. With the help of the Medicaid calculator, you can even determine the approximate asset values and come down to a level where you can be eligible for Medicaid.
Benefits of MAPTs
Medicaid come up with several benefits and we cannot list enough. However, here is a cherry-picked overview of the different advantages of Medicaid Asset Protection Trust:
Protecting Your Assets
Stating the most obvious, Medicaid asset protect trusts help in protecting your assets. They not only allow you to meet down your assets into a considerable amount but also protect the assets for your listed beneficiaries.
Your Assets are In Safe Hands
Medicaid is best known for its safety measures. Even though your assets might be limited and are spent down, they protect your assets with utmost scrutiny. They have a Medicaid Estate Recovery program where they can keep your assets safe.
Pays You Reimbursements
Yes, you heard it right, if something happens to your assets due to their negligence, Medicaid pays for the reimbursements.
Pays For the Remaining Amount When You’re Dead
If you’re dead and your beneficiaries come to collect the reimbursements, then they can easily collect it. They just have to show some necessary papers that prove to them that they’re the beneficiaries and then they’re good to go.
Disadvantages of MAPTs
Even though MAPT comes with a plethora of advantages, there are certain aspects you need to keep in mind that the MAPT might not have. They are:
MAPT is Only Good for A Short Term
If you’re thinking of safeguarding your assets for a prolonged period of time, then we would suggest not going for MAPT. MAPT is appropriate for people who belong to the low-income group and are currently healthy. It is primarily for people who don’t foresee the need for long-term care.
No Look Back Period
A few years back, the Look-Back period was one of the biggest advantages of MAPT. Currently, some states are completely abolishing this 60-month look-back method. For example, California has completely abolished the look-back method on asset limit, applicable since Jan 1, 2024.
On the other hand, New York has also adopted this only for long-term homes and other community-based services. Some states are even thinking about implementing a new look-back period from 2025.
No Control to Your Assets
Another big disadvantage you might face that can come up during your investments, is no control over the assets you give up. Once you transfer and enroll your assets to MAPT, you finally relinquish your control over them. The trusts would no longer be owned by you.
Longer Penalty Period for Medicaid’s Eligibility
With the look-back period being reduced and your control over the assets going down, the penalty period is also one of the biggest disadvantages of MAPT. The penalty period for not matching their eligibility is 5 years in most states, that considerably a longer period of time.
Types of Assets That Go With MAPT
Different types of assets are aligned with the MAPT criteria:
- Your private residence where you still live in.
- Both of your checking and savings accounts.
- Your 401k’s and IRAs.
- The certificate of deposits to your name.
- Life insurance policies.
- Stocks and bonds.
- Vehicles that are less than 7 years old.
Do You Need an Attorney for MAPT?
A real estate attorney or an asset protection attorney helps you to keep tabs on your assets and safeguard them from any harm. Now, to answer your former question, yes you need an attorney before you give up all your funds to MAPT.
Your attorney will help you and guide you through the entire process and also ensure that your assets are rightfully protected. Your attorney plays a major role in interpreting the complex legal jargon you might not understand and also guides you in making rightful investments.
Furthermore, since the rules are going through constant change, it’s imperative that you have an attorney by your side to help you make the right decision. You should hire an attorney who is good with the rules and regulations of MAPT.
What To Look for When You Hire an Attorney For MAPT?
This is a very common question you possess while looking for an attorney who is going to review your overall MAPT plans.
Always remember, that there is no single attorney, that works for MAPT as a standalone service. They have different package plans, among which you have to choose wisely.
Make sure that your attorney investigates all of your assets including your POA, wills, healthcare directives, and other plans. Always check that your attorney is well-aware of HIPAA medical information releases before making any decision.
Costs to Create MAPT
The costs of creating a MAPT vary from state to state. It can be as low as $2,000 and as high as $12,000. I know, I know, at a glance, the price might seem a tad bit high, but in reality, it isn’t. On the brighter side, MAPT is a feasible way to save money. Why? Let’s elaborate.
Suppose the nationwide average cost of nursing home care is around $7,900 per month. On this front, MAPT prevents you from paying out of your pocket at that time and saves your costs.
Alternatives to MAPT
Now that you’ve learned everything you know about MAPT, you’re now looking for an alternate that comes with MAPT. Did we just read your mind? Maybe!
In addition to investing in MAPT, there other asset protection plannings you can opt for. Trusts like Irrevocable Funeral Trusts or Medicaid Compliant Annuities do not have the clause of spending down the countable assets.
You can even look for their planning strategies that would cater to help you lower your income to become an eligible member of Medicaid.
Final Thoughts
There you have it! Now you know everything that you should’ve known about Medicaid asset protection trust. They might seem elaborate and complicated initially, but once you get the hang of it, you’ll know all about it.
We hope this blog was informative and helpful. Let us know if we missed out on anything!
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