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Planning Ahead: Part Eight

Dunn & Hemphill, PA • Nov 27, 2020

Gifting Assets and Medicaid Asset Protection Trusts

Previously we discussed qualifying for “nursing home” Medicaid. This is important because most of us cannot afford to pay $90,000/year to the nursing home. You have more planning options when you have at least five years to plan before you enter a skilled nursing facility, which is the current look-back period for gifts made before you apply for Medicaid. If you have made gifts within the look-back period before applying, Medicaid will assess a penalty calculated by dividing the total value of your gifts by the penalty period divisor $6,832 (2020) to determine months of ineligibility for nursing home room and board Medicaid. For example, a gift of $68,320 would result in 10 months of ineligibility.
When you have five years to plan, you could gift real or personal assets to someone you trust completely (the donee). Your hope would be that the donee would use those gifted assets for things that Medicaid will not provide and your family will have what is left when you die. This is a complicated topic. Gifts to family members are risky. Gifts to an irrevocable Medicaid Asset Protection Trust can significantly reduce those risks.
To put it simply, a trust is a contract between the “settlor” (the person who creates the trust), the “trustee” (the person who manages the trust), and the “beneficiary” (the person who receives the benefit of the trust’s income or principal). When creating an irrevocable Medicaid Asset Protection Trust (MAPT), the person planning for Medicaid qualification is the settlor who creates the trust and puts assets into it. He or she names a trustee to manage the assets and names himself or herself beneficiary of only the income from the trust. If you are able to wait out the five-year look-back period after transferring your assets to a Medicaid Asset Protection Trust, the assets you put into the trust will not be counted as your resources and Medicaid will have no claim for recovery against them upon your death.
If you remember only one thing it needs to be this: It is almost never too late to plan. Call us for a no-obligation consultation.

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