What is a Medicaid asset protection trust?

On Behalf of | Oct 20, 2023 | Medicaid/Medicare

Medicaid benefits are extremely valuable for Massachusetts residents who need long-term care. However, finding out that you have too many assets to qualify for Medicaid can be a crushing blow.

One option to address this issue is setting up a Medicaid asset protection trust (“MAPT”). This is an irrevocable trust that you place assets into to so they are not counted for eligibility purposes when applying for Medicaid.

Advantages of an MAPT

Using an MAPT can allow you to receive the long-term care you need by making you eligible for Medicaid while still protecting your assets.

When applying for Medicaid, the government typically looks at your income. But when you are applying because you need long-term care, whether in a nursing home or at home, the government also looks at your assets.

This is how an MAPT can help. Your assets are protected in the trust and will not be counted in your asset calculation. Additionally, the assets in the MAPT are not included in your estate after you pass away. This means they are not part of Medicaid estate recovery, which would allow Medicaid to collect the expenses they spent on your care from your estate.

Potential disadvantages of an MAPT

There are some potential drawbacks to using an MAPT. You must create one at least five years before needing long-term care, otherwise the assets you place in it will still be subject to the five-year lookback period.

When you apply for Medicaid, the government looks back five years to see if you have given away, sold or transferred any assets over the past five years that could have been used to help pay your long-term care costs.

Many times, people do not know five years in advance when they will need long-term care, so the lookback period could prevent you from putting some of your assets in the MAPT.

Since an MAPT is an irrevocable trust, you are required to appoint a trustee to manage your assets. You must have someone you trust in this role.

Knowing if an MAPT is right for your situation depends on many different factors. It is never too early to explore options and start planning to increase your chance of getting the benefits you need in time.