Are you concerned about affording long-term care in the future should you or your spouse need it? Or worse, the possibility that your estate may be depleted as a result of the costs? Nursing homes today in Pennsylvania cost over $12,000 per month. If you stayed in a nursing home for five years, that’s $720,000!! It’s impossible to say when, if and how long you’ll need long-term care. But the fact is, for everyone, it’s a risk worth insuring against.
If you’re not keen on long-term care insurance or life insurance with a long-term care rider, or you can’t get underwritten, another idea to consider is the Medicaid Asset Protection Trust (MAPT).
The MAPT is a sophisticated way to shelter assets in advance of needing a nursing home. Assets that are appropriate for the MAPT include second homes and your “never money” or “legacy money.” Done correctly and at the right time, the MAPT can shelter a portion of your estate from ever being spent on the nursing home. The property in the MAPT is safe for your family no matter how long you need a nursing home.
Here are a few common questions about the MAPT:
1 What if I have a MAPT and run out of money in the nursing home — Will they kick me out? No, once you are admitted to the nursing home, the nursing home by law must continue to keep you in that home and provide the same care. They can’t kick you to the curb.
2 Isn’t a Medicaid Trust irrevocable and therefore I would lose all control? It is by nature irrevocable, but the trust is designed to give you maximum control. It can be setup to provide you income from the investments inside the trust. It is designed to ensure you protect the assets as long as you’re living. You can also modify a MAPT as long as the Trustee and beneficiaries are in agreement. We also have a few tricks up our sleeve to give you more control over the trust.
3 Why consider a MAPT if it’s more restrictive than a regular trust? The idea behind the trust is that you want to protect it against nursing home costs and make sure your family inherits the property. The MAPT is a sophisticated yet accessible way to protect part of your estate.
4 Does the “5 Year Lookback Period” affect the MAPT? Yes, which is why you want to start planning while you’re still healthy. There is a strategic window where it makes maximum sense to establish the MAPT. Generally, the age is mid-late 60’s but the number will vary depending on a variety of circumstances. If you’re younger or older but still think you’re a good candidate, you should call my office to setup a meeting.
5 Can I put my IRAs into the MAPT? No, IRAs are not appropriate for the MAPT. If you did that, you would have to cash out the IRAs and pay all of the taxes. Definitely not a good idea.
6 How do I know if a MAPT is appropriate for me? Check in with me (Jeremy) to see if it’s something that makes sense. Usually, we look at MAPTs once a client is in their mid to late 60’s and there are appropriate assets (second homes, never money, legacy money, etc.) to fund the trust with.
If you’re looking for a long-term care planning solution, this could be a great option for you to consider.