Protecting the Home From Medicaid Estate Recovery, Part 2

Protecting the Home From Medicaid Estate Recovery, Part 2

Last month, we discussed protecting your home from Medicaid estate recovery, an issue that affects all too many homeowners who make use of the Medicaid program. If you’re curious about what Medicaid Estate Recovery is, or how it works, click the link above to view that article. Today, we’ll take a look at the first tool you can use to protect your home, the Medicaid Asset Protection Trust (MAPT).

The Rules of Qualifying for Medicaid

Before we can discuss how a MAPT can protect your home, we’ll need to clarify some aspects of how a person qualifies for Medicaid. In order to qualify in New York, the applicant’s total “countable assets” must be worth less than $16,800. Countable assets are generally liquid assets, such as money in bank accounts, stocks, bonds, mutual funds, and any real property that is not the primary residence. Applicants should keep in mind that their primary home is not considered a countable asset, but is still subject to recovery. Applicants are allowed to own any amount of non-countable assets. These include vehicles, insurance policies, personal property which isn’t a liquid asset, and assets held in irrevocable trusts. 

Medicare also makes use of a “look-back” period, which takes into consideration the value of one’s countable assets for the past sixty months. If at any period in the past sixty months from the time of your application you held more than the asset limit, a penalty period will occur, which will make you ineligible for Medicaid for a time period that is dependent on how much you were over the limit. 

What Is a Medicaid Asset Protection Trust?

With proper planning, we’re able to “spend down” the countable assets, effectively turning them into non-countable assets. In order to do so, we establish a MAPT. The MAPT is an irrevocable trust, meaning that it is unable to be changed or dissolved after it is created. Unfortunately, revocable trusts are not effective tools for spending down, as those assets are still considered countable assets. When assets are transferred into an irrevocable trust, those assets are no longer considered countable, as they’re no longer under the discretion of the applicant. In order to transfer assets into a MAPT and avoid violating the look-back period, they must be transferred before the look-back period, which is why planning for Medicaid as soon as possible is crucial to protecting your assets.

By transferring assets into a MAPT, we’re able to ensure their safety and that they’ll be passed down to your designated beneficiary. Most importantly, because the assets in a MAPT are not considered part of your estate, they cannot be targeted for Medicaid estate recovery. Therefore, a home that is transferred into a MAPT is safe from this recovery, and will successfully be passed on to your loved ones. 

While a MAPT is an outstanding tool both for spending down and protecting your home from recovery, they’re not the only tool available. Next month, we’ll discuss another way you can achieve both of these goals, with some additional benefits. If you’re ready to start planning for Medicaid or want to get started on a comprehensive estate plan, contact Ledwidge & Associates today.

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Protecting the Home From Medicaid Estate Recovery, Part 2

Ledwidge & Associates

Ledwidge & Associates, P.C. in New York City has years of experience helping clients create estate plans that fit their needs. We have the experience and resources to handle your critical legal matters with the utmost care and attention to detail.
Protecting the Home From Medicaid Estate Recovery, Part 2

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