Over the years I have been asked this question many times – “Why don’t more people do the Irrevocable Medicaid Asset Protection Trust (MAPT)?” Well, actually, many people do.
For those who don’t, the answer is simple – clients often receive incorrect advice on elder law from well meaning but ill informed advisors, accountants, financial planners, general practice lawyers or others.
Here are seven myths which relate to misconceptions clients have come in to see us with due to incorrect advice.
I actually had a divorce lawyer representing my client’s soon to be ex-husband insist that she could not sell her house in the MAPT. I wrote back that this was nonsense, having done it many hundreds of times and advising that nothing in the trust prohibits the sale. The proceeds are payable to the trust and remain protected. The trust may then buy a condo for example and the look-back period does not start over.
Not correct. A properly drafted MAPT preserves all of the homeowner’s property tax exemptions as well as the exemption from capital gains tax on the sale of the primary residence — $500,000 for a couple or $250,000 for a single person.
While it is true that it takes five years to protect all of the assets in the MAPT, many are unaware the time “pro rates”. For example, if the client has to go into the nursing home after four years have passed they only have to pay for the one year that is left.
You’ve been around, you know things happen, so you reserve the right to change the trustee at any time. Not only does this keep them honest but it gives you control. Your son or daughter may be in charge of the trust – but you are in charge of them.
Similar to #4 above, in a well-drafted MAPT you reserve the right to change who you leave it to – knowing that sometimes wishes change.
While it is true that you can only get income from the trust it does not mean you have no use of the principal. You retain the right to make gifts of principal in any amount to any of your children. You may gift it to them and, although they cannot give it back to you, they may spend it on your behalf if they wish to.
Strange as it may seem, in New York you may revoke an irrevocable trust. Here’s why. It’s irrevocable because you, the grantor, cannot revoke it alone. So as far as you’re concerned, it’s an irrevocable trust. However, New York has another rule on the books that says that if every person named in the irrevocable trust agrees in writing that they no longer want the trust, then you may revoke it on consent of all the named parties. Since that is just you and your adult children, it is usually a simple matter to accomplish. One of the reasons for a revocation might be the client has chosen to live in a life-care community that includes nursing home care as part of the buy-in.
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At Ettinger Law Firm, our elder law lawyers focus on the needs of older adults in New York when protecting their families, assets and future. We recognize that many of our clients have minimal or no experience working with attorneys — our low-pressure approach enables you to make these crucial life decisions at your own pace. Trust our team to educate you and make the information you need accessible throughout the process.
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