What is a Medicaid asset protection trust?

On Behalf of | Jan 10, 2024 | Medicaid Planning |

As you get older, healthcare and medical needs generally increase. Medicaid could help you pay for these long-term needs, but qualifying might be a challenge.

There are specific income and asset thresholds you must meet to be eligible for Medicaid. These rules are strict and you must fall under the limit to qualify for Medicaid.

A Medicaid Asset Protection Trust (“MAPT”) is a tool used by many elderly New York residents to help them qualify for Medicaid when they would otherwise be over the income and asset limit. Assets placed into an MAPT are not counted toward the Medicaid asset limit.

Assets you should and should not place in an MAPT

There are various types of assets that you can place into an MAPT including:

  • Checking and savings accounts
  • Mutual funds
  • Stocks and bonds

You can place your home or other real estate into an MAPT, but transferring retirement accounts into an MAPT is usually not recommended since you might encounter tax penalties for cashing them out.

While MAPT’s are generally irrevocable, under New York law, you could revoke your MAPT if all named parties agree in writing to the revocation.

When you set up an MAPT you are the grantor because you are the one placing your assets into the trust. You select beneficiaries who will receive your assets and the trust is managed by a trustee.

You or your spouse cannot be a beneficiary

You must name someone besides yourself or your spouse for the MAPT assets to not be counted for Medicaid purposes. However, your children or parents are acceptable beneficiaries.

Once your MAPT is set up, the assets are no longer considered yours which can qualify you for Medicaid. You should be aware of the five-year lookback period. Medicaid looks at your assets for the five years before your filing.

Therefore, it is often best to set up your MAPT well in advance and while you are still healthy. This helps ensure the lookback period will not prevent you from qualifying for Medicaid when you need to.