Medicaid is a government program which can be leveraged to pay for a client’s homecare or nursing home needs. As a means tested government program, in order to qualify for Medicaid, a client must not have assets exceeding certain levels or excess income. This being said, however, there is almost always a way to qualify a client for Medicaid benefits.
Planning for a client’s long-term care, and the potential that the client may want to leverage Medicaid to pay for his/her long-term care, should be considered from the outset. The sooner Medicaid planning is done, the more likely the client will qualify for Medicaid benefits without having to contribute any of his/her assets toward the costs of his/her care.
The most common Medicaid Planning tool is the Irrevocable Medicaid Asset Protection Trust (“MAPT”). While MAPTs are extraordinarily complex, the essential function of a MAPT is to allow clients to transfer assets to the MAPTs and, thereby, begin the 5 year look back clock running for assets transferred. If nursing home care Medicaid is sought, an applying client must disclose 5 years of his/her asset statements to the local Department of Social Services, which is the government agency responsible for administering the Medicaid program in New York. This disclosure and review is what is referred to as the “5 year lookback period.” If assets have been gifted in the last 5 years, the client will not qualify for nursing home Medicaid, typically at great financial cost. If, however, assets have been transferred more than 5 years prior to the time Medicaid is sought, these transfers do not appear in the 5 year look back period and, therefore, are not considered when applying for nursing home Medicaid. The beauty with the MAPT is that these Trusts are customed drafted to give the client a certain level of control over the assets in the MAPT while still starting the 5 year look back clock running.
It is important to note that MAPTs are irrevocable, and, therefore, as a general rule, assets transferred into the Trust cannot be transferred back to the client. It is therefore crucial when creating these Trusts to build in as much client control and flexibility as possible, while also ensuring the client retains sufficient assets outside the Trust to provide for themselves. For this reason, when creating and funding a MAPTs, it should be standard practice to work with clients’ investment and tax professionals.
While the use of a MAPT may be the preferred way to engage in Medicaid planning, there are other options available. Just like when assets are transferred to a MAPT, a client can start the 5 year look back clock running by simply transferring an asset to a child. Of course, before this is considered, a client would be well advised to speak with a knowledgeable Elder Law attorney – while transferring assets to a child may seem simple, once assets are transferred they are nearly impossible to get back (and that’s not to mention possible adverse tax consequences, etc.)
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