As people age, they frequently rely on Medicare to cover basic health care costs. This federal health insurance program pays for many medical expenses for those who have lived in the U.S. legally for at least five years and reached the age of 65. However, Medicare doesn’t cover the costs of long-term care in a nursing home or assisted living facility. If you become incapacitated or unable to live independently, you either have to cover these costs or apply for Medicaid benefits.
However, not everyone is eligible to use Medicaid as a resource without careful planning. To learn how to protect your assets, first talk with a New York elder law and Medicaid planning attorney to determine if a Medicaid Asset Protection Trust (MAPT) is right for you.
Medicaid is a health care program funded by both the state and federal governments to provide financial assistance to a variety of people, including those 65 and over. But to obtain Medicaid benefits, you have to meet specific financial conditions—and those conditions could drain your life’s savings and the assets you’ve earned.
Understanding a MAPT
Many people find it challenging to meet the financial rules for Medicaid eligibility because they must first “spend down” their assets before they reach a level acceptable by Medicaid. For example, if you make $400 a month over the eligibility limit, you’ll have to use that money to pay for your long-term care needs before Medicaid begins paying for them. 
A MAPT, also called a Medicaid trust, is an estate planning tool that might help shelter your assets so you can meet the eligibility requirements set by Medicaid. It helps you spend down your assets without using them for long-term care.
Advantages of a MAPT
The main purpose of a MAPT is to transfer assets into it so Medicaid won’t count them when determining your financial eligibility for benefits. You won’t have to worry about how to pay for long-term health care. You have an estate planning strategy that helps you qualify for Medicaid without having to spend down your assets by paying for part of your long-term care needs. Here are some additional benefits:
- You can still receive income generated by the assets you’ve placed in your MAPT. However, it’s important to remember that if the income is payable to you, you may end up exceeding the Medicaid limit for eligibility.
- You’re permitted to designate a beneficiary to receive whatever money isn’t used in the MAPT when you die. You also have a “limited power of appointment” that allows you to change the beneficiary should your circumstances change before you die.
- Your beneficiaries are protected from the capital gains tax on your primary residence. After you die, if your beneficiary sells your home, it will be valued at the price when you gifted it, rather than the purchase price.
Disadvantages of a MAPT
First, you must establish your MAPT in advance to avoid penalties during Medicaid’s “look back” period. During this timeframe, Medicaid examines any financial transactions you’ve made to see if you gave away money or assets to someone else as a way to appear that you have less money than you’re reporting. Generally, this look-back period is five years. However, New York will implement a 2.5-year look-back in 2024.
Here are some other considerations the savvy elder law and Medicaid planning attorneys at Landskind and Ricaforte Law Group P.C. will help you with:
- You have to give up control of your MAPT to a trustee. This person will manage all the assets and money in the trust, so you must choose someone you trust. Likely you’ll designate a family member, although this person cannot be your spouse. This type of trust can’t be established as a MAPT if you retain any type of control over your assets. Your MAPT trustee will have the power to sell and buy assets, make changes to your investments, and decide how all trust assets are used.
- You need to work with a skilled Elder Law and Medicaid Planning attorney when creating your MAPT. The expertise and knowledge of this type of attorney may cost a considerable amount of money—however, it’s worth the cost because your overall savings will likely be worth it.