Long-Term Care Insurance v. Medicaid Asset Protection Trust

Long-term care insurance (LTCI) and the Medicaid Asset Protection Trust (MAPT) are often thought of an alternatives to each other. They are not. While LTCI is both a shield and a sword, the MAPT is a shield only.

LTCI protects your assets and income from the costs of care. But it has a positive effect (the sword) in that it actually pays for someone to come into your home and care for you there. The MAPT protects assets, like your home and your life savings, but it does not protect your income (pensions, social security, interest, dividends, etc.). The MAPT is solely a defensive tactic. That being said, in the event LTCI is unavailable to the client for medical or financial reasons, the MAPT is an excellent tool. There is truth in the saying that a good defense is the best offense. With the MAPT in place five years ahead of time, the client’s assets are protected and Medicaid will then pay for the cost of care. While income may be protected for community care in the home, with the pooled income trust, for institutionalized care in a facility your income is available to pay towards your care.  If you have a spouse at home, they may keep about $3,435 per month of the couple’s combined income and sometimes more, depending on whose income it is -- the community spouse’s or the institutionalized spouse’s.

Our stated preference for clients is LTCI, if available. Most clients would prefer to “age in place” or, in other words, stay in their own home and receive home care if needed. Here, the LTCI stretches your dollars to allow you to remain in the home for years more than you might have been able to afford otherwise. If your spouse is unable to care for themselves, it allows you to call in extra help so that you do not wear yourself out acting as a caregiver in your later years.  Unfortunately, studies show that spouse caregivers often die first due to the stress of care giving.

Some clients have adopted a hybrid approach when it comes to LTCI and the MAPT. They purposely underfund the LTCI, say taking a $300/day benefit ($9,000/month) instead of a $600/day benefit ($18,000/month). They also establish the MAPT and transfer their assets to the trust. The thinking is that the $300/day will pay for the home care that they may need and want, at half the cost of the full policy. On the other hand, if they end up in a nursing home, they won’t lose their assets due to the $9,000/month they may be short, and Medicaid will pick up the difference.

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