Long-term care planning is important to estate planning, as many planners will need assisted living services. Creating a Medicaid Asset Protection Trust (MAPT) can help you protect your estate while qualifying for assisting living benefits through Medicaid. A MAPT allows estate planners to prevent their assets, including their family home, from disqualifying them for Medicaid eligibility.
If you’d like to discuss the benefits of including a MAPT in your estate or general long-term care planning, Palmer & Slay, PLLC is here to help. Our skilled estate planning attorneys can help you understand the pros and cons of creating a MAPT and advise whether this will meet your goals. Contact Palmer & Slay, PLLC to schedule a case evaluation and learn more about how we can help you protect your assets and Medicaid eligibility.
Long-Term Care Planning Is An Important Aspect of Estate Planning
A problem many estate planners face is that they have an asset worth a fair amount of money but don’t have significant liquid cash available. As a person ages, they may begin to incur more healthcare-related expenses. They may benefit from entering a long-term care facility with trained medical staff who can meet their medical needs. Medicare and most private insurance providers don’t cover long-term stays in assisted living facilities.
Insurance benefits may cover a short stay at a rehabilitation facility after a stroke, surgery, or other medical incident, but the benefits will stop after a specific period. In 2020, Mississippi’s median skilled nursing home care cost was $7,057 per month. Individuals who live in a skilled nursing home facility for multiple months can see their assets drained relatively quickly by nursing home costs. Working with an estate planning attorney to prepare for a potential stay in an assisted living facility can help you protect your assets so you can pass them down to your beneficiaries.
Qualifying for Long-Term Care Benefits Through Medicaid
Qualifying for Medicaid benefits is important to protect your assets from being drained to pay for long-term care. However, qualifying for Medicaid isn’t easy, especially if you own your home, vehicle, or other assets. When a person applies for Medicaid, Medicaid will examine his or her assets and any recent asset transfers to determine eligibility.
Suppose a person knows he or she may need assisted living care in the next year or two. He transfers ownership of his assets to his son to lower the value of the assets he owns in an attempt to qualify for Medicaid. Medicaid will look back on any transfers he made within the five years before applying for Medicaid. As a result, the assets he transferred to his son will still count against him. Without a MAPT, Medicaid may seize your assets after you pass away to cover your long-term care costs. Creating a MAPT can help you qualify for Medicaid benefits.
The Benefits of MAPTs for Mississippi Estate Planners
A Medicaid Asset Protection Trust can shield your assets from Medicaid and allow you to keep them safe to pass on to your beneficiaries. A MAPT is considered an irrevocable trust. Once you create the trust by executing the trust agreement and transferring assets into the trust, you will generally not be able to transfer them back. However, once the Medicaid Asset Protection Trusts owns your assets, Medicaid cannot count the assets as your assets when determining eligibility. Additionally, Medicaid won’t be able to seize the assets to cover your costs. After you pass away, the successor trustee will distribute your assets to your beneficiaries according to your wishes.
Can I Transfer My Assets to My Children to Qualify for Medicaid?
There are several reasons why transferring your assets through a MAPT can be preferable to transfer ownership directly to a child or another beneficiary during your lifetime. Suppose you’d like to transfer ownership of your family home to your child or children. Suppose you transfer the ownership of your family home into your child’s home right away, then apply for Medicaid to cover long-term care costs in a few years. In that case, Medicaid will look back at your past transfers and deny eligibility.
However, if your child lives with you in a caretaking role, you may be able to transfer your home through the Child Caregiver Exception. Being eligible for the Child Caregiver Exception has specific requirements, so speaking to an attorney is important. The attorneys at Palmer & Slay, PLLC can help you understand whether you’re eligible for this exemption and the pros and cons of using this exception instead of transferring ownership of your home into a MAPT.
The Tax Benefits Of MAPT
Properly created MAPTs allow the capital gains tax exclusion to apply to the entire primary residence. A property that appreciates over time in a MAPT will have a higher stepped-up cost basis. The home’s value will be determined on the date the parent died, not the date of the earlier transfer. This can result in the elimination or reduction of capital gains taxes when the adult child sells the property in the future.
Continued Control of Assets and Income within the MAPT
Although MAPT trusts are considered irrevocable trusts, you can continue to live at your home and receive income from the assets in the trust as you did before you created the trust. The MAPT owns the assets, but you can still receive income from the investments in the trust. You will not be able to sell the assets, though, because a MAPT is considered to be an income-only trust. You will also have the power to designate which trustee or trustees will control the assets in the trust.
Discuss Your Estate Plan with a MAPT Attorney in Mississippi
If you’re considering creating a Medicaid Asset Protection Trust (MAPT) but still have questions, the attorneys at Palmer & Slay, PLLC are here to help. One of our skilled attorneys will carefully listen to your estate planning goals and help you develop an estate plan that enables you to meet those goals. We have extensive knowledge of federal and local estate planning laws and will use our experience to create a thorough, legally enforceable MAPT. Contact Palmer & Slay, PLLC to schedule a consultation and learn more.