18 Oct Medicaid Asset Protection Trust in Phoenix, Arizona

Since more than half of Americans turning 65 today will eventually require some sort of long-term care, part of establishing a secure financial future involves knowing how to protect your assets and your estate from exorbitant nursing care costs. Phelps LaClair is an Arizona law firm with offices in Phoenix, Scottsdale, Chandler, and Mesa. We’re elder care attorneys with experience in estate planning, elder care law, and tax law. Our combined know-how in these areas enables us to create the right asset protection pathway for each client we serve.

Medicaid’s Policies

Medicaid is a government provision for older Americans, but it has strict income and other eligibility requirements that necessitate a spend-down of personal finances. Unless assets are protected, Medicaid may require a person to pay out-of-pocket expenses before becoming eligible. And that could leave the healthy remaining spouse in the poorhouse and deplete intended inheritances from being passed on to your beneficiaries.

Medicaid Asset Protection Trust

That’s where the Medicaid Asset Protection Trust (MAPT) can be helpful. It’s an irrevocable trust, which means it can never be revoked or cancelled, and when it comes to being Medicaid-ready, there are advantages. Unlike a revocable trust, where the grantor maintains ownership of the assets while living, with an irrevocable trust, assets are no longer owned by the grantor. That means assets placed into a Medicaid Asset Protection Trust will not count as part of your income, since the trust is now the owner, rather than you. You still maintain control over the assets in the trust, but the trust is the owner of your assets.

Naming a Trustee

A MAPT also requires an independent trustee other than you or your spouse to be named. For example, naming a trusted adult child or a trusted close friend as your MAPT trustee is common. This trustee becomes the manager of the trust, so they should be entirely capable, loyal, and faithful. However, if you ever decide you want to change your trustee, as the grantor of an irrevocable MAPT, you have the right to do so.

Assets in the MAPT

If a primary residence (home) has been transferred to a MAPT, you still have the right to live in that home. You are also able to sell a home that is in the trust’s name or buy a new one in the trust’s name, without losing the protection of the trust. Moreover, by placing your primary residence into a Medicaid Asset Protection Trust, your heirs will save on capital gains tax, since the cost basis for capital gains taxation is measured at the time of your death, rather than measuring it from the time of your home’s initial purchase.

A few additional details to know about a Medicaid Asset Protection Trust: If income-producing assets like stocks and bonds are transferred to the trust, you can still receive the income they produce. You may also sell those stock and bonds, as well as other assets that have been placed in a MAPT. But you cannot ever touch the principle on items like stocks and bonds, since the principle is no longer owned by you, but by the trust.

Look-back Period

And finally, a Medicaid Asset Protection Trust is subject to a look-back period of five years. That means the trust needs to be established five years prior to the time when you will need Medicaid. Otherwise, your Medicaid eligibility may be nullified.

Elder Care Lawyers Can Help

If you’re seeking ways to protect your estate assets and still qualify for Medicaid, a Medicaid Asset Protection Trust may be for you. If you live in the Phoenix Valley and are seeking qualified elder care attorneys to help you create the right approach to prepare for your future needs, contact us at Phelps LaClair. Our first consultation is absolutely free. You’re also invited to attend our informative free seminars on “Top Ten Estate Planning Mistakes.” We’ve got four seminars scheduled in July and August in Phoenix, Mesa, and Chandler. Click here for more details.

Images used under creative commons license – Commercial Use (7/5/18) Photo by Aaron Ang on Unsplash