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Medicaid is a state- and federally funded, means tested program that pays for long-term care. For applicants who fall into certain categories, Medicaid imposes specific rules on how much income and resources they can have and still qualify for benefits.
Each state has different rules for how much an applicant may have in income and assets to qualify for Medicaid. In addition, the qualifications are different for home care Medicaid versus nursing home Medicaid. To qualify for Medicaid, you must fall under your state’s corresponding limit. For example, in New York State, an individual may have up to $28,133 and a couple can have $37,902 in resources and qualify for Medicaid. The income limits differ between home care and nursing home care in New York State. New York State is an income spend-down state, not an income-cap state. Therefore, a person can be eligible even if they are not a low-income person.
If your assets are above the resource limit that would allow you to qualify for Medicaid, you may be able to engage in planning that will allow you to qualify for Medicaid. This planning often involves establishing a Medicaid Asset Protection Trust (MAPT) or an equivalent planning device permitted under your state’s laws.
In New York State, when a MAPT or similar trust is properly drafted and implemented, it can protect your assets from Medicaid while enabling you to qualify for a home-care benefit. As to nursing home Medicaid, upon the creation and funding of a MAPT, there is a five-year lookback period (waiting period) to qualify for nursing home Medicaid.
How Does A MAPT Work?
A MAPT is an irrevocable trust created during your lifetime. It must be in writing and properly acknowledged. You must also pick a trustee (not yourself) to manage the trust and its assets. The trustee can be a family member whom you trust.
In addition, assets to be put in the MAPT actually need to be transferred. In the case of real estate, you must transfer the deed to the trust. Stocks and bonds must be registered in the name of the MAPT.
A MAPT also functions as an estate planning tool. This is because you can designate who receives what remains of the trust upon your passing. The beneficiaries you choose will receive the assets per the terms of the trust agreement.
A MAPT must be created with sufficient time to avoid running afoul of Medicaid lookback periods. When it comes to qualifying for nursing home Medicaid, transfers to trusts are subject to a five-year lookback period. That is why this type of planning should be done before the need for Medicaid arises, preferably as early as possible. Currently, in New York State, there is no lookback period for Medicaid home care. However, this may change in 2024 which is another reason not to delay on implementation of a Medicaid plan.
While you no longer own assets after they are transferred to a MAPT, and assets may not revert to you, you can still benefit from these assets. For example, if you transfer your home to a MAPT, you may still live there for the remainder of your life.
In other situations, income generated from the trust principal may be paid to you (although you cannot liquidate or withdraw the principal). However, note that this income can be counted as available income for purposes of Medicaid eligibility.
Can You Protect Your Home With a MAPT?
People frequently wish to use a MAPT to protect their homes because it is their biggest asset. Although Medicaid may not “count” your home as an asset that falls within your resource limit, this does not mean that your home is safe from Medicaid.
For example, the home is not exempt from Medicaid’s estate recovery program. Following a person’s death, Medicaid can recover what it paid for their care by filing a lien against the person’s estate. This often includes the family home. A proper planning strategy, which may include using a MAPT, can avoid this scenario.
MAPTs also offer a certain degree of flexibility. For example, if you need to downsize to a smaller home, the MAPT can sell the house, receive the proceeds of the sale, and then purchase an apartment where you may reside. The new property is still protected from Medicaid, and the lookback does not start over.
There are also some other features of MAPTs that lessen the sting of “irrevocability.” You may retain the power to change the trustee or beneficiaries of the trust.
Assets That Can Be Placed in a MAPT
Many types of property can be placed in a MAPT to help you qualify for Medicaid. Examples include:
- Bank accounts
- Stocks and bonds
- Mutual funds
- Brokerage accounts
- Certificates of deposit
- Real estate (subject to some exceptions)
- Other investments
However, there are some assets you cannot place in a MAPT. However, there are some assets that should not be placed in a MAPT. Typically retirement plans, IRAs, annuities and other retirement resources should not be transferred to a trust.
Every person’s situation is unique, and you should not assume a MAPT is suitable for you without speaking with a qualified elder attorney. The elder law attorneys at Kommer Bave & Ciccone LLP can help you consider how a MAPT may affect other benefits you receive, your overall estate plan, its tax consequences, and much more.
Every adult is assumed to be capable of making his or her own decisions unless a court determines otherwise. If an adult becomes incapable of making responsible decisions, the court will appoint a substitute decision maker, usually called a “guardian,” but called a “conservator” or another term in some states.
What Is Guardianship?
Guardianship is a legal relationship between a competent adult (the “guardian”) and a person who because of incapacity is no longer able to take care of his or her own affairs (the “ward”). The guardian can be authorized to make legal, financial, and health care decisions for the ward. Depending on the terms of the guardianship and state practices, the guardian may or may not have to seek court approval for various decisions. In many states, a person appointed only to handle finances is called a “conservator.”
Some incapacitated individuals can make responsible decisions in some areas of their lives but not others. In such cases, the court may give the guardian decision making power over only those areas in which the incapacitated person is unable to make responsible decisions (a so-called “limited guardianship”). In other words, the guardian may exercise only those rights that have been removed from the ward and delegated to the guardian.
The standard under which a person is deemed to require a guardian differs from state to state. In some states the standards are different, depending on whether a complete guardianship or a conservatorship over finances only is being sought. Generally, a person is judged to be in need of guardianship when he or she shows a lack of capacity to make responsible decisions.
A person cannot be declared incapacitated simply because he or she makes irresponsible or foolish decisions, but only if the person is shown to lack the capacity to make sound decisions. For example, a person may not be declared incapacitated simply because he spends money in ways that seem odd to someone else. Also, a developmental disability or mental illness is not, by itself, enough to declare a person incapacitated.
What Does the Process for Guardianship Involve?
In most states, anyone interested in the proposed ward’s well-being can request a guardianship. An attorney is usually retained to file a petition for a hearing in the probate court in the proposed ward’s county of residence. Protections for the proposed ward vary greatly from state to state, with some simply requiring that notice of the proceeding be provided and others requiring the proposed ward’s presence at the hearing. The proposed ward is usually entitled to legal representation at the hearing, and the court will appoint an attorney if the allegedly incapacitated person cannot afford a lawyer.
At the hearing, the court attempts to determine if the proposed ward is incapacitated and, if so, to what extent the individual requires assistance. If the court determines that the proposed ward is indeed incapacitated, the court then decides if the person seeking the role of guardian will be a responsible guardian.
A guardian can be any competent adult — the ward’s spouse, another family member, a friend, a neighbor, or a professional guardian (an unrelated person who has received special training). A competent individual may nominate a proposed guardian through a durable power of attorney in case she ever needs a guardian.
The guardian need not be a person at all — it can be a nonprofit agency or a public or private corporation. If a person is found to be incapacitated and a suitable guardian cannot be found, courts in many states can appoint a public guardian, a publicly financed agency that serves this purpose. In naming someone to serve as a guardian, courts give first consideration to those who play a significant role in the ward’s life — people who are both aware of and sensitive to the ward’s needs and preferences. If two individuals wish to share guardianship duties, courts can name co-guardians.
Courts often give guardians broad authority to manage the ward’s affairs. In addition to lacking the power to decide how money is spent or managed, where to live and what medical care he or she should receive, wards also may not have the right to vote, marry or divorce, or carry a driver’s license. Guardians are expected to act in the best interests of the ward, but given the guardian’s often broad authority, there is the potential for abuse. For this reason, courts hold guardians accountable for their actions to ensure that they don’t take advantage of or neglect the ward.
The guardian of the property inventories the ward’s property, invests the ward’s funds so that they can be used for the ward’s support, and files annual, detailed financial reports with the court. A guardian of the property also must obtain court approval for certain financial transactions. In some states guardians must also give an annual report on the ward’s status. Guardians must offer proof that they made adequate residential arrangements for the ward, that they provided sufficient health care and treatment services, and that they made available educational and training programs, as needed. Guardians who cannot prove that they have adequately cared for the ward may be removed and replaced by another guardian.
For more information on how a guardianship may benefit your family, contact the Elder Law Attorneys at Kommer Bave & Ciccone LLP.