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.

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