Read Part I here in the article series by Joanne Seminara, Esq. 

Seniors and persons with disabilities are justifiably concerned about the cost of long-term care, that is, long-term home care and nursing home care not covered by traditional health insurance, such as Medicare or other insurance. If you have been diagnosed with a long-term illness for which you will need care, the prospect of spending most or all of your hard-earned savings paying for this care, or worse, going without needed care, can be terrifying.

The cost of home care is catastrophic, especially for those who need full-day or 24-hour care.  Even more worrisome is the high cost of nursing home care, which can easily cost $15,000 to $18,000 per month and quickly wipe out a lifetime of careful savings. Then, there is the unsettling possibility of a lien being placed on your estate or your home for Medicaid services provided during your lifetime.

Enter the Medicaid Asset Protection Trust:
Medicaid is a government-funded program through which you can receive care at home or in a nursing home.  Applying for Medicaid is a complex process requiring extensive documentation of assets and income that can be very difficult to navigate. An experienced Elder Law attorney can protect your assets using a Medicaid Asset Protective Trust, or can suggest other ways to protect your assets.

A properly drafted and funded Trust can provide many benefits while helping you obtain the long-term care you may need.

For many people the home that they own and live in is their most valuable asset.  In transferring your home to a Medicaid Asset Protective Trust you can preserve your and your spouse’s exclusive lifetime residential rights and protect the home from a lien for Medicaid services.  If you place this asset (or any other assets) in this kind of Trust, the transfer of assets starts the Medicaid 5 -year “look- back” period which affects the timing of your eligibility for nursing home care.

This Medicaid Asset Protection Trust can also manage bequests to your loved ones for example, by providing specially tailored protections for a beneficiary who is disabled; a beneficiary who is irresponsible with money; and a beneficiary who is a minor.   If you have a beneficiary who is being sued, is in debt, or in the middle of a divorce, this Trust can provide these further protections.  Moreover, if properly drafted by an experienced attorney, a Medicaid Asset Protective Trust can:

  1. Provide significant capital gains tax savings compared to transferring the title to your home directly to family members during your lifetime;
  2. Name Trustees to manage your Trust assets for you;
  3. Provide that such assets not be distributed until after your death; and
  4. Act as a Will substitute and allow your estate to avoid probate

Caution:There is a 5-year period, starting from the date you transfer assets to the Medicaid Asset Protective Trust, which governs whether a penalty period will affect your eligibility for Medicaid-covered nursing home care. Thus, it is best to create and fund this kind of Trust more than 5 years before you are likely to need nursing home care.  In contrast, there is only a one-month penalty period for transfers of assets in connection with applications for Medicaid home care.

Because the law has many nuances and pitfalls, you are well advised to seek the advice of an Elder Law Attorney before creating a Medicaid Asset Protective Trust or any other kind of Trust, transferring assets or making a Medicaid application. An Elder Law attorney can accurately answer all your questions and assist you with a strategy to meet your individual needs.

Additional resources provided by the author

Joanne Seminara
March 30, 2017

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