Medicaid is a state and federally funded health program for low-income people of all ages. For applicants who fall into certain categories, Medicaid imposes specific rules on the amount of income and resources they can have while still qualifying for benefits.

Each state has different rules on how much an applicant can have in income and assets to qualify for Medicaid. To qualify for Medicaid, you must fall under your state’s corresponding limit, which can be as low as $2,000 for an individual and $3,000 for a married couple.

These resource limits may also vary depending on whether a person is applying for residential or nursing home care, community services, or regular Medicaid.

If your assets exceed 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 equivalent planning arrangement permitted by your state’s laws.

When an MAPT or similar trust is properly drafted and implemented, it can protect your Medicaid assets while allowing you to receive this benefit.

How does a MAPT work?

A MAPT is an irrevocable trust created during your lifetime. The main purpose of an MAPT is to transfer assets to it so that Medicaid does not count those assets against your resource limit when determining if you qualify for Medicaid benefits.

A MAPT must be in writing and duly acknowledged. You must also choose a trustee (not yourself) to manage the trust and its assets. The trustee can be a trusted family member.

In addition, the assets to be placed in the MAPT must actually 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 MAPT.

A MAPT should be created with enough time to avoid running into Medicaid review periods. When it comes to qualifying for Medicaid, transfers to trusts are subject to a 60-month look-back period. This is why this type of planning should be done before the need for Medicaid arises, preferably as soon as possible.

Although you no longer own any assets after they are transferred to an MAPT and the assets do not return to you, you can still benefit from those assets. For example, if you move your home to an APM, you may still be able to live there.

In other situations, the income generated by the capital of the trust may be paid to you (although you cannot liquidate or withdraw the capital). However, note that this income may be considered disposable income for the purposes of Medicaid eligibility.

Can you protect your home with an MAPT?

People often want to use an MAPT to protect their home because it is their greatest asset. Although Medicaid does not “count” your home as an asset that falls within your resource limit, that does not mean your home is Medicaid safe.

For example, the home is not Medicaid exempt estate recovery program. After a person dies, Medicaid usually tries to recover what they paid for their care by filing a lien on the person’s estate. This often includes the family home. A proper planning strategy, which may include the use of an APM, can avoid this scenario.

MAPTs also offer a degree of flexibility. For example, if you need to downsize your house into a smaller home, MAPT can sell the house, receive the proceeds from the sale, and then purchase an apartment where you could reside. The new property is still Medicaid protected, and the rollback does not start over.

There are also other characteristics of APMs that lessen the sting of “finality”. You can retain the power to change the trustee or beneficiaries of the trust.

Assets that can be placed in an MAPT

Many types of assets can be placed in an MAPT to help you qualify for Medicaid. Examples include:

  • Bank accounts
  • Stocks and bonds
  • Mutual fund
  • Brokerage accounts
  • Certificates of deposit
  • Real Estate (subject to certain exceptions)
  • Other investments

However, there are certain assets that you cannot place in an MAPT. For example, many retirement plans, IRAs, and other retirement resources cannot be transferred to a trust. They would have to be liquidated first. Also, in some states, moving your home to an MAPT may not protect it from Medicaid.

The fees associated with preparing an MAPT can be expensive, ranging from a few dollars to several thousand dollars. Each person’s situation is unique, and you should not assume that an MAPT is right for you without speaking with a qualified seniors’ attorney.