Articles Posted in Medicaid Asset Protection Trust

 

    1. Makes sure your estate goes to whom you want, when you want, the way you want. Most estate plans leave the assets to the next generation outright (i.e., in their hands) in equal shares. However, with a little bit of thought on your part, and some guidance from an experienced elder law estate planning attorney, you may dramatically improve the way your estate is ultimately distributed. For example, you may delay large bequests until children or grandchildren are older or give it to them in stages so that they have the chance to make some mistakes with the money without jeopardizing the whole inheritance. Similarly, you may place conditions on receipt of money such as “only upon graduation with a bachelor’s degree” or “only to be used to purchase an annuity to provide a lifetime income for the beneficiary”. The possibilities, of course, are endless.
    1. Allows you to give back to the people and places that have helped you. Again, most people leave their assets to their children in equal shares. Yet time and again we see children who really don’t need the money or, unfortunately, don’t deserve it. Even when they do need and deserve it, there is a place for remembering those people and institutions who have helped make you what you are today.
    1. It proves stewardship by showing your family that you cared enough to plan for them. When you put time, thought and effort into planning your affairs it sends a powerful message to your loved ones. You are saying that you handled the matter with care and diligence. This will reflect itself in how the money is received, invested and spent by your heirs.

What do you do when a client comes in to see you and says that his mother is going into a nursing home and she has $300,000 in assets. In fact, mom scrimped and saved all of her life to have this nest egg and now she desperately wants to see her children get an inheritance.

Although you may protect all of your assets by planning five years ahead of time with a Medicaid Asset Protection Trust, all is not lost if nothing has been done and the client finds herself on the nursing home doorstep.

The advanced elder law technique, used to protect assets at the last minute, is called the “gift and loan” strategy. Here’s how it works. Let’s assume, for the purposes of our example, that the nursing home costs $15,000 a month. When mom goes into the nursing home, we gift one-half of the nest egg, in this case one-half of $300,000, or $150,000, to her children. Then we lend the other $150,000 to the children and they execute a promissory note agreeing to repay the $150,000 in ten monthly payments of $15,000 per month, together with a modest amount of interest. Now we apply for Medicaid benefits. Medicaid will impose a penalty period (i.e., they will refuse to pay) for 10 months on the grounds that the gift of $150,000 could have been used to pay for mom’s care for 10 months. Medicaid ignores the loan since it was not a gift. It is going to be paid back, with interest, according to the terms of the promissory note. What happens is that the ten loan repayment installments will be used to pay for mom’s nursing home care during the penalty period. Just when the loan repayments are finished, the penalty period expires and Medicaid begins to pick up the tab. Lo and behold, the children get to keep the $150,000 gift and mom has saved some of the inheritance for her children.

Elder Law Estate Planning is an area of law that helps us maintain control of our lives and assets in four basic areas.

First, Elder Law is planning for disability which includes naming people who will make decisions for us if we become incapacitated. You choose the people who will act on your behalf and thereby avoid the government taking over your life in a “guardianship proceeding.” Wills do not provide for disability because they are plans for death. Living trusts, on the other hand, name trustees who manage trust affairs during incapacity. Other necessary disability planning documents include a Power of Attorney that names people who make financial and legal decisions, a Health Care Proxy that names people who will make medical decisions and a Living Will that expresses end of life decisions such as resuscitation.

Second, another protection of Elder Law is asset protection planning from the costs of long-term care. Plan A to protect assets from long-term care and nursing home costs is to buy long-term care insurance. If you do not have long-term care insurance, Plan B is the Medicaid Asset Protection Trust (MAPT) that protects trust assets from nursing home costs paid for by Medicaid after the assets are in the trust for five years. The MAPT protects assets from home care costs paid for by Medicaid after the assets are in the trust for two and a half years.

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