The decision to engage in elder law planning is obviously an extremely important one. As the Medicaid Asset Protection Trust (MAPT) is often the centerpiece of an elder law plan, it is crucial to properly assess whether (and when) said trust should be created and funded.
Generally, the most important factors used to determine if one is a candidate for asset protection planning and a MAPT are as follows:
- The age and health of the potential applicant and their spouse.
If one is in their 40s, 50s, or even early 60s, the need to create and fund a MAPT is generally low, unless they have been diagnosed with a debilitating illness such as Alzheimer’s, Parkinson’s, ALS, Multiple Sclerosis, or any other neuro-impacting disease that necessitates long-term care either at home or in a nursing home.
One of the most important considerations when contemplating whether and/or at what point to transfer assets to a MAPT is if the person will need nursing home care before the five (5) year lookback period for nursing home Medicaid has expired. Obviously, the risk is a lot lower if the person is in the age group discussed above.
Presently, there is no lookback period for home care Medicaid, however, it is uncertain whether New York will implement the enacted legislation that would put a two-and-a-half (2.5) year lookback period in place for home care Medicaid in 2025 or 2026.
- B) The amount of fixed income of the potential applicant and their spouse.
The greater the amount of fixed income that the potential applicant and/or spouse has from Social Security, pensions, and Required Minimum Distributions (RMDs) from IRAs, 401Ks, or other retirement assets, the less likely it is that they will be eligible for Medicaid, as the RMD income, Social Security, and pension will disqualify them from Medicaid. Regardless of the fact that they may have transferred their home and/or other non-retirement assets to a MAPT, significantly large amounts of fixed income from any source may make Medicaid eligibility out of reach. However, with the Medicaid home care program in New York, the applicant is allowed to utilize virtually all of their income for their needs by enrolling in a pooled community trust.
- C) Whether the potential applicant has a long-term care insurance (LTCI) policy.
Having LTCI is always advantageous when planning for long-term care, yet, one would think that having this insurance would eliminate the need to do asset protection planning. In actuality, having this insurance opens the door to being able to prepare and fund a MAPT, and provides a financial buffer against the cost of long-term care during the lookback period created by the transfer of assets to the MAPT.
In some cases, one can purchase LTCI and, at the same time, create and fund a MAPT: Doing so will give them the benefit of knowing that if they need long-term care during the lookback period, they have the LTCI coverage as a buffer.
As can be seen from the above, being proactive in exploring the use of a MAPT is critical. Unless one is very wealthy, it is imperative to engage in asset protection planning in order to shelter one’s life savings from the cost of long-term care.
