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Do you have any personal experience with Medicaid Asset Protection Trusts (MAPTs)?
To those unfamiliar, MAPTs are irrevocable trusts designed to preserve family’s assets while maximizing an applicant’s chances of qualifying for Medicaid.
Would love to hear your thoughts on this!
These can be abused by family members so be very, very careful.
You need to be very careful who controls an irrevocable trust. They could deny you (if you are the one subjected to the inheritance that way) or your intended recipient, the use of the money.
Our family is gong through that right now. My mom decided to leave her money to my two sisters in a regular trust and to me in one of these. She left my sister in charge and they have made comments over the years of “you deserve to be homeless” (I had gotten cancer in grad school, dad decided to help me paying a part of my rent as student health insurance had unlimited out of pocket and I had to take out substantial loans to pay for medical care; dad helping me is what prompted my two sisters to make that comment).
My two sisters will inherit this when I die (so an inherent conflict of interest) and so far have refused to allow me to withdraw anything. Even when the trust says I can do it for specific purposes and it was for those purposes I wanted to withdraw the money. The trust also says if anyone contests this then they are treated as dead and lose their inheritance.
What was ironic is the trust was written when I had finished my PhD, was an assistant professor for 18 months and so wouldn’t be using public services ever again (I had SNAP prior to then when I had cancer but couldn’t get medicaid as i was a student thus a ton of student loans public and private). My SS alone is higher than the limits for any public services, let alone adding in RMD’s. The trust was written from the point of view of making sure I still had assets if I had public services except I will never qualify for them and my sisters are refusing to allow me to spend any of the money.
What this has effectively done is cut me out of any family inheritance and meant that my sisters will get my share because if I contest anything about it I automatically lose the money. Don’t do that to your family. You may be unaware of the way family will behave when significant money is involved after your death. Make sure whomever administers the irrevocable trust will not benefit if any money is left and has no incentive to mistreat the recipient by denying them funds. Family dynamics can be very destructive and parents may not be aware of them.
Thank you for bringing this up, Bogdan. Spouse’s father just passed and they had a trust that is supposed to become an irrevocable trust after his death. Spouse is supposed to be a trustee. We haven’t gotten any paperwork yet to see what being a trustee will entail.
We were also wondering why they would do this for Medicaid planning purposes when they have plenty of income and wouldn’t need a Medicaid nursing home? And is it moral? Chris
See my post below.
I don’t have experience with MAPT, but did use a Supplemental Needs Trust for an elderly parent that did end up on Medicaid in a nursing home setting, after several years in assisted living. The move to a nursing home was needed due to a higher need for nursing care. The SNT use was suggested by the family’s elder care attorney, and it worked out the way the attorney said it would to qualify for Medicaid. The SNT preserved the assets for the family members use, but they did not own the assets. Use of a SNT may not work for all families, but it did for us. The SNT was created upon the death of one parent who had the family assets in their name at their passing.
Don’t you feel that you have an obligation to pay for care received, then have Medicaid step in, and not let taxpayers foot the bill?
One issue with medicaid paying for your nursing home care is they take (the amount varies by state) all your money and income each month and leave you with very little to pay for things like toothpaste, clothes, adult diapers if you need them, med or doctor copays (and yes with medicaid in most states you still have that although the amount is small), any gifts you want to give for birthday’s or whatever, etc. In my state they leave you with $66/mo. That is not enough for even the basics and someone has to pay. That someone will be your family. This is where having access to more money to pay for this kind of stuff is helpful.
I do not see how these trust arrangements are any different than the various legal tactics that the wealthy and others employ to avoid paying taxes. If paying as little taxes as possible is ok so then certainly taking advantage of this should be viewed similarly. Many extremely large estates successfully avoid estate taxes by using sophisticated techniques. Dynastic wealth is becoming more extreme in the United States.
My parent did pay for a portion of his care- all of his monthly income including SS, Pension and RMD paid for his care, before Medicaid paid their portion to the NH. We were only utilizing government benefits to the extent allowed by the program. In my parent’s case, his monthly obligation probably paid for about 75% of the actual NH billing. The SNT allowed us to provide additional resources to my parent such as a private room and additional agency help. I don’t feel you should necessarily judge the use of a government program without fully knowing the details of the family situation- each one is quite different.
Elder law attorney here. These trusts are irrevocable. The trust maker loses control of the assets. In 5 years he or she qualifies for Medicaid and may live in a dump of a nursing home while the heirs know they will enjoy the assets.
Yes. And depending on who controls it and how the trust is written it can set up an inherent conflict of interest. If the person controlling the money stands to inherit what is left the have, if they are not ethical and don’t have the best interests of the person involved in mind, they will not spend the money on the beneficiary’s needs so they get more after that person has died.
Paul, it’s good to hear from an attorney whose answer doesn’t default to creating a trust. Thanks for your post.
Hey Bogdan, great subject.
I know they are irrevocable trusts, and that here in Ohio there is a five year look-back, and they must be created five years before you need LTC. The irrevocable part kind of scares me. Of course, you can’t put IRAs into a trust without first taking a full distribution. (Most of our non-real estate assets are traditional IRAs). Still, if the kids needed our legacy, I would consider the trust, but since they have more money than we do, I’m not concerned about that aspect.
This is something I’m considering for my aging parents, but I’m trying to understand the full scope by hearing the perspectives of others. Obviously, I will contact an elder attorney, but thank you for sharing your thoughts.
There are many ways couples can plan for Medicaid without using a MAPT.
Some lawyers think the MAPT is a wonderful tool. Others do not. When I explain what an MAPT actually is many elderly clients lose interest since they want to control and use their assets. The children then find a lawyer who tells them what they want to hear.
We did that for my mother-in-law’s condo. She wanted to leave it to our daughter to pay for college, and the estate lawyer set up an MAPT for her.
We’re now past the five-year lookback period, and MIL’s SS payment is more than the Medicaid income limit, so it was probably a moot point. Still, it was nice to know that things were done correctly for estate planning, etc.
Why not just gift the condo and avoid the expenses and hassle of a trust?
Outright gifting exposes the property to claims of the recipient’s creditors.
Agree. But if the gift is to a child under eighteen who is going to sell it to pay for college you have to ask youself, what creditors?
No, the creditors of the person making the gift, not the recipient. It’s called “fraudulent transfer.” Somewhat of a legal term of art because it’s not “fraud” in the traditional sense. It’s considered “fraudulent” as to the creditors of the person making the gift because but for that asset being gifted away the creditors could have reached that asset to be made whole upon default.
All states have a fraudulent transfer statute. In Ohio the fraudulent transfer look back period is 4 years after the transfer or 1 year after it could have reasonably been discovered.
Paul Ward specifically stated that outright gifting “exposes the property to the claims of the recipient’s creditors” and NOT the giver.
It could be both.
Thank you David. This is what I’m considering for my aging parents and their home. Appreciate you sharing.