The numbers are clear: 70% of Americans expect to need long-term care at some point in their retirement. Many people aren’t aware of the importance of long-term care until they are uninsurable because of health conditions or can’t afford the premiums. How can you plan? A Medicaid Asset Protection Trust can help with long term care costs.
Depending upon where you live and the type of care needed, long-term care costs anywhere from $50,000 to $100,000 per year. With an average stay of two to five years, it’s a hefty financial burden without long-term care insurance, a MAPT, and good planning.
Creating a Medicaid Asset Protection Trust requires the help of an experienced estate planning attorney to be sure you obtain all of the benefits of such a trust. Long-term care costs are one of the biggest financial worries for retirees, as noted in a recent article, “This Trust Can Protect Your Assets From Long-Term Care Costs,” from Kiplinger.
The Medicaid Asset Protection Trust (MAPT) moves money out of your estate into a trust, so it becomes uncountable for Medicaid means-testing purposes. It has to be created and funded at least five years before the applicant can be deemed eligible for Medicaid funding, known as the “Medicaid look-back.”
The trust needs to be set up by an experienced estate planning attorney because there are many fine points to consider. The MAPT won’t serve its intended purpose if it’s not set up correctly.
The MAPT must be an irrevocable trust, meaning the grantor (who set up the trust) no longer has access to those assets. This can be a little unnerving. You’ll also want to speak with your estate planning attorney about your plans for the near and distant future. How will you access funds if you’re putting funds into the trust? Who will be able to access them?
This trust will also benefit families with assets closer to the old estate tax levels. In 2024, the gift and estate tax exemptions are still very high—$13.61 million. However, if the law sunsets without Congress acting, the estate tax could revert to around $5 million or lower if the federal government decides more wealth needs to be taxed. Assets in a trust are not part of the taxable estate, so having a trust also protects assets from federal and state estate taxes.
Trusts are also powerful means of controlling asset distribution. Your MAPT could distribute a set amount of money to a beneficiary throughout their lifetime, or a minor grandchild could be given a certain amount after they’ve completed four years of college or achieved a particular goal.
Consult an estate planning attorney to learn how a Medicaid Asset Protection Trust can help with long term care costs, if they’re right for you, and how to get started. If you would like to learn more about managing assets for long term care, please visit our previous posts.
Reference: Kiplinger (July 11, 2024) “This Trust Can Protect Your Assets From Long-Term Care Costs”
Photo by T Leish
