Many people look towards long term care as thy get older. This is a time when you would need help with your personal affairs, upkeep, and health care. Some people prefer to get their long term care in their own home while others are put in a nursing home facility.
Whatever the case, long term care costs are very expensive and it’s agonizing to watch your hard-earned money going down for your medial bills and personal upkeep in the home. Of course, these are funds you would feel more fulfilled passing down to your dependent loved ones.
However, there is Medicaid, a government program that settles the cost of your long-term care. But to be eligible for Medicaid in New York, you must have limited assets. What this basically means is that people who are financially strong with substantial income source cannot benefit from Medicaid. So how do you ensure that your “substantial income” doesn’t get eaten up by your long-term care instead of passing down to your loved ones?
The answer is Medicaid Asset Protection Trust (MAPT).
Medicaid Asset Protection Trust (MAPT)
A Medicaid asset protection trust is a type of irrevocable trust that protects your assets while keeping you eligible for Medicaid. It’s a great strategy adopted by elder law attorneys in New York to protect your assets from being eaten up by your long term care costs.
How Medicaid Asset Protection Trust works in NYC
Typically, asset protection is a legal strategy that allows you to shield your assets from liabilities, such as tax, lawsuits, debts, etc. Estate planning and elder law attorneys NYC often turn to irrevocable trusts to offer you asset protection. That is because all assets kept in an irrevocable trust leave your ownership and become the sole property of the trust. Therefore, you, your creditors, nor the court can touch those assets to settle any claim against you since the assets are no longer yours (literally).
So no hospital or assisted living facility can reach into your Medicaid Asset Protection Trust to settle your bills. These bills will be settled by Medicaid as if you have no assets, because actually, those assets are no longer in your ownership.
When to create a Medicaid asset protection trust in order to be eligible for Medicaid
There is a look back period of y years when you apply for Medicaid. They will look at your financial history during the last 5 years. If you are discovered to have made transfers (gifts) during that time window, you will be disqualified from Medicaid benefits for some time.
Notably, retitling assets into an irrevocable trust is regarded as gifting the trust. That is why you have to execute and fund your Medicaid asset protection trust at least 5 years before applying.
Benefits of using Medicaid Asset Protection Trust in NYC
1. When you transfer assets outright to a beneficiary, you won’t really be protecting those assets as you would obviously think. Let’s say you bequeath your house to your child. Should that child marry and get divorced, they may lose half the value of that property. Their creditors can come knocking, and the property would be gone in the twinkle of an eye.
But when you keep and transfer same assets in a MAPT, you are sure no creditors, bitter spouses, lawsuit, or Medicaid can lay claim to them.
2. Tax benefits. Having a Medicaid Asset Protection Trust is also better than an outright transfer when it comes to tax.
Some people will consider transferring a home to a child while reserving a life estate for themselves. Should your child sell the property, you would lose money on the capital gains exclusion.
On the other hand, property kept in a MAPT will usually have a higher value when you die because housing cost is ever on the increase. So should your child sell after your death, the price will be based on the value at your death, not at the time the MAPT was created.
3. You continue to enjoy your income and MAPT assets. Although the assets in a Medicaid Asset Protection Trust are no longer yours, you still receive some benefits. You would not be allowed to sell any investments but will still receive your income normally.
The trust assets are no longer in your ownership but you are still relatively in your control because you are the one who writes out the trust’s terms and selects a trustee who will manage the assets.
Get help from an elder law attorney near you NYC
To ensure you have a solid plan in place towards your long term care, speak with a New York elder law attorney and estate lawyer near you. Call us to speak with one.