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A Medicaid Asset Protection Trust to Save Your Most Cherished Assets

According to the latest statistics, Americans aged 65 and older have about a 70% chance of needing some kind of long-term care, and 20% of them will need it for as long as five years. The median annual cost for a semi-private room in a nursing home across the United States is currently almost $96,000 per year.

This is a grim reality that is expected to get worse. By 2023, the median cost of a semi-private room in a nursing home is expected to rise to around $102,000 per year. And by 2025, nearly $108,000 per year.

This is undoubtedly bad news for anyone who needs nursing home care now or will need it in the future. But there are things you can do to ensure that nursing home and other long-term care costs don’t wipe out your entire estate.

Qualifying for Medicaid

For individuals who do not have adequate long-term care insurance, nor the resources to pay for it out-of-pocket, Medicaid is the social service that can help them pay for the high cost of long-term care. But Medicaid has restrictive asset limits that bar most people from qualifying, at least until they have liquidated and spent down most of their assets. This includes their retirement accounts (IRAs, 401(k)s, 403(b)s, etc.), life insurance policies, and even their real estate, regardless of how long it has been in their family.

Qualifying for Medicaid also depends on several other factors, the biggest of which is whether you are married or single. A single individual could easily be left with only a house (which will have a lien placed on it), one car, some personal property, and a maximum of $2000 after spending down their assets to qualify for Medicaid.

Fortunately, the law provides an alternative to spending down your most cherished assets to qualify for Medicaid. That alternative is called a Medicaid Asset Protection Trust.

How Does a Medicaid Asset Protection Trusts Help?

A Medicaid Asset Protection Trust is an irrevocable trust designed to place assets outside your estate so that they will not be counted toward Medicaid’s asset limit. This can help ensure that the assets that mean the most to you can stay with your family, no matter how long you may be in a nursing home.

Assets held in a Medicaid Asset Protection Trust are exempt from the Medicaid spend-down requirement. This means when your assets are being counted for Medicaid eligibility, any assets held in a Medicaid Asset Protection Trust that you own will not be considered.

Medicaid’s Look-back Period 

Another important aspect to keep in mind with regard to qualifying for Medicaid is the five-year look-back period. When you apply for Medicaid benefits, you will be asked about your current assets. But you will also be asked about assets that you may have given away or sold within the five years immediately preceding your application.

That five years is the look-back period during which Medicaid will evaluate transactions you have made to determine if you gave away or sold anything solely for the purpose of Medicaid qualification. If you have, you may be subject to a period of Medicaid ineligibility. This can be extremely expensive for you, since you will likely have to pay for the care you need out of your own pockets until your period of Medicaid ineligibility has expired.

That is why if you think that you will need Medicaid’s help to pay for the cost of long-term care in the future, you need to plan now. If you don’t want to possibly lose everything you own to the cost of long-term care (should you or a loved one need it), consult with an experienced estate planning/elder care attorney about a Medicaid Asset Protection Trust or other long-term care planning options today.

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