The U.S. Department of Health & Human Services proffers that by the time your client reaches age 65, there’s an almost 70% chance that the client will need some type of long term care. This care could be in-home help or care at an assisted living or nursing home facility. Planning for the potential of needed care is a big part of elder law.
Medicaid is the only government program that will pay for long term care beyond 100 days for non-Veterans. In order to qualify for Medicaid benefits, your client will need to pass income and asset tests. In addition, state Medicaid programs have a 5-year lookback period (3 years in California). The Medicaid department will scrutinize any transfers that your client has made during the look-back period. If your client has transferred assets for less than fair market value during that time, your client will incur a penalty period and will not be able to receive Medicaid benefits right away.
The Medicaid Asset Protection Trust (MAPT) can be used in a proactive planning case, where your client is not in immediate need of care. Assets are placed into the trust, the client waits out the look-back period, and thereafter can get care immediately if needed. The MAPT is designed in a way that passes Medicaid scrutiny so that the assets therein are not counted for eligibility purposes. Using the MAPT in this manner gives your client peace of mind knowing that if they need care down the road, they won’t lose their life savings paying for that care.
The MAPT can also retain many tax benefits, such as grantor trust status, the homestead exemption, and a basis adjustment on trust assets. Lifetime beneficiaries can also receive distributions from the MAPT during your client’s lifetime, just in case those funds are needed. The lifetime beneficiary can use those funds for any purpose, including helping out your client.
Elder law is about not only planning for what happens when your client dies but focusing on what happens when your client is alive. Having a solid plan in place promotes family harmony and protects your client’s legacy.
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