Protect a Home From Medicaid with an Asset Protection Trust

The value of your parents’ home has skyrocketed in recent years, but they don’t have much in the way of savings or other resources. They inherited the home from your grandparents and they desperately want to leave it to you, but they’re worried its value will prevent them from qualifying for Medicaid and they’ll have to sell it to pay for the long-term care costs they know will be coming some day.

You do some research and find out they’re right about the home impacting their Medicaid eligibility. Then you talk with a Certified Medicaid Planner and discover even if your parents do qualify, Medicaid might take their home after they die as reimbursement for their care. But when you say your parents are healthy and probably won’t need long-term care for years, the planner tells you using a Medicaid Asset Protection Trust might solve all of your parent’s home ownership problems.

A Medicaid Asset Protection Trust (MAPT) can be a valuable tool for homeowners hoping to qualify for Medicaid and also leave their home to their family as an inheritance. Any home in a MAPT is exempt from the asset limit, one of Medicaid’s eligibility requirements. Homes placed in MAPTs are also safe from Medicaid Estate Recovery Programs, which will try and collect reimbursement for long-term care costs after the beneficiary’s death.

Connect with us to learn if a MAPT might be used in your specific situation or read on for more information.

 

Medicaid Eligibility Requirements and the Look-Back Period

To qualify for Medicaid’s long-term care coverage in a nursing home or at home, applicants need to meet two financial requirements – an asset limit and an income limit. In most states in 2024, the asset limit is $2,000. If a home was counted toward that limit, it would put the homeowner well over it. However, there are multiple reasons and ways the home can be exempt from the limit, including placing it in a Medicaid Asset Protection Trust (MAPT).

Medicaid applicants can not just give away their assets, including their home, to get under the eligibility limit. To make sure they don’t, Medicaid uses the Look-Back Period. In most states, the Look-Back Period is five years. This means the state will look back into the applicant’s financial history for the five years before they submitted their application to make sure they haven’t given away any assets or sold them at less than fair market value. To learn more about the Look-Back Period, which is different in California and New York, click here.

Unfortunately, creating and using a MAPT violates the Look-Back Period. But, if you create it and place your home in a MAPT five years before you might need Medicaid, then it can prevent your home from counting against the asset limit. That’s why, in the scenario we painted to start this article, the Certified Medicaid Planner asked if your parents were healthy. For seniors who are in good health and won’t need long-term care for at least five years, using a MAPT can be a great strategy to qualify for Medicaid because they can place their home in the MAPT and then wait five years before applying to avoid violating the Look-Back Period. If seniors are in poor health and will likely need long-term care sooner than five years from now, using a MAPT as a strategy to qualify for Medicaid will not be an option.

 

Medicaid Estate Recovery

Every state has a Medicaid Estate Recovery Program (MERP) that is required by law to try and collect reimbursement for care expenses covered by Medicaid after the death of the beneficiary who received the care. If the deceased beneficiary was a homeowner, chances are good the home is the most valuable item in their estate after their death. If needed, the state will force the sale of the home to collect its Medicaid reimbursement. Some states will place a lien on the home to prevent its sale and make sure the state can collect via the home if needed. The lien may be placed as soon as the beneficiary starts receiving long-term care through Medicaid, depending on the state.

There are many ways the home can be protected from estate recovery, including being placed in a Medicaid Asset Protection Trust. Again, these kind of trusts violate the Look-Back Period, so they need to be created at least five years before the homeowner will need long-term care.

 

“Medicaid

It’s important to understand the following terms associated with a Medicaid Asset Protection Trust (MAPT):

Grantor – This is the person who creates the trust. When it comes to MAPTs, the grantor would be the senior homeowner who believes they will be applying for Medicaid in the future.
Trustee – This is the individual who controls the trust and the assets in it. The trustee can not be the grantor or the grantor’s spouse in a MAPT, but they can be another family member or anyone else.
Beneficiary – This is the person who will control the assets in the MAPT after the death of the grantor. The beneficiary can be the same person as the trustee, but the beneficiary can not be the grantor for a MAPT.

In addition to following the rules about who can be the trustee and the beneficiary, MAPTs must also be irrevocable. This means they can not be changed in any way, or canceled, after they have been created. There are also restrictions on how the assets in the trust can be used that will vary depending on the state.

 

How a Certified Medicaid Planner Can Help with a Medicaid Asset Protection Trust

Our Certified Medicaid Planners can let you know if a MAPT would make sense for your situation, and they can make sure you use it the right way. Making a mistake using a MAPT could lead to your Medicaid application being denied and a penalty period of ineligibility.

Our planning professionals will know the asset limit for your specific situation and if your home will count against it without the MAPT. If you do need a MAPT to make your home exempt, we can help you create one according to the rules of your state. If you need an Elder Law Attorney to create this kind of trust where you live, we partner with several of them for situations just like this.

We will make sure your MAPT follows all the rules when it comes to the trustee and the beneficiary. And we’ll make sure the trustee knows the rules that will govern the MAPT after it’s put in place.

Medicaid Asset Protection Trusts can be helpful for senior homeowners, but only if they know how and when to use them. Our team of professionals can make sure you use them the right way, but we can only help if you connect with us.

Ready for your free consultation?

Our team of Certified Medicaid Planners™ will help you navigate the difficult landscape of Medicaid for long-term care.

Schedule Your Free Discovery Call