If you or a loved one has been turned down for long-term care insurance, cannot afford the premiums for the long-term care insurance, or believe that you will apply for Medicaid in the future, then you should consider Medicaid Planning.
When you apply for Medicaid, any gifts or transfers of assets made within five years of the date of application are scrutinized and subject to a penalty. This is referred to as the “lookback” period. That penalty is based on the dollar amount of the transferred assets divided by the average monthly private patient care rate, the resulting number translating to the amount of days or months that the applicant is ineligible for Medicaid.
Keep in mind that a Medicaid applicant cannot have more than $2,000 in countable assets, although married couples have different rules. Countable assets include: 1) checking and savings accounts; 2) stocks and bonds; 3) certificates of deposit; 4) real property (other than your primary residence); and 5) motor vehicles (if you own more than one). An individual can still qualify for Medicaid through careful estate planning and coordination of assets.
Medicaid Asset Protection Trusts, or MAPTs, are special irrevocable trusts created to hold assets that would otherwise be countable as an available resource for Medicaid purposes. Once you create a MAPT, you will transfer as many assets at one time that you wish to protect from being considered into an account opened in the name of your Trust. This transfer will begin the five-year lookback period until you can apply for Medicaid. After this initial transfer, the Trustee of your MAPT will manage your assets and you will no longer have control over your assets. This is why you should appoint someone you have utmost confidence in as your Trustee.
Further, many people worry that they will lose their home to the state if they will need Medicaid assistance for long-term care. However, with pre-planning, your home can be protected from Medicaid Estate Recovery by transferring it into an Enhanced Life Estate Deed, or sometimes called a “Lady Bird Deed.”
If you are interested in a Medicaid Asset Protection Trust, or to not lose your homestead if you need Medicaid, you should consult with an attorney knowledgeable about Medicaid planning. If you are considering applying for Medicaid in the future, the Medicaid Asset Protection Trust will be a useful estate planning tool to preserve your assets and avoid a possible penalty.
Julia Dean is the managing attorney at The Dean Law Firm, PLLC, a boutique law firm practicing in estate planning, probate, guardianships, elder law, and civil appeals. Mrs. Dean has been recognized as a Top Attorney and Leading Advisor by Acquisition International, Forbes, Newsweek, H Texas, Houstonia, and the Sugar Land Sun, and has earned Martindale-Hubbell’s Client Distinction Award. The Dean Law Firm is committed to bringing you peace of mind by providing thoughtful estate planning for your family.