Medicaid Trust Pros & Cons: What You Need to Know

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If you’re like most people, you want to protect your assets in case you need long-term care. One of the top strategies for this is drawing up a Medicaid asset protection trust, also known as a MAPT. But before you do, it’s critical to understand how they work. In this blog post, we will discuss Medicaid asset protection trust pros and cons and help you decide if this long-term care strategy is right for you!

What is a Medicaid Asset Protection Trust (MAPT)

A Medicaid asset protection trust is a legal entity or framework that holds title to assets you transfer into it. It is a type of irrevocable trust that estate planning attorneys use to help you pay for long-term care costs.

By transferring assets into the trust, you no longer own them. However, your selected trustee distributes the trust assets for your benefit. With a MAPT, your assets no longer count against you for Medicaid eligibility purposes.

A MAPT protects your assets while you still qualify for Medicaid benefits. Medicaid benefits are means-tested. You do not qualify for coverage if your assets and income are too high.

With a MAPT, your assets no longer count against you for eligibility! Working in an attorney-client relationship helps you achieve your financial and estate planning goals!

How Does Medicaid Planning Work?

Medicaid planning is a strategy to protect assets from long-term care costs. Once you place assets into an irrevocable Medicaid trust, they are no longer part of your estate, and Medicaid can’t seize them to:

  • Pay for your long-term care costs OR
  • Pay for Medicaid recovery of the assets you want to leave to heirs

Medicaid Recovery is the state’s liability claim on your estate after you pass away. Some families must sell estate assets such as a family home to pay back Medicaid. However, with a MAPT, your family may keep your assets as their inheritance!

Medicaid Benefits and Why You Need Them

Medicaid is a crucial benefit because it pays for all of your long-term care costs, such as:

  • Assisted living community expenses
  • Nursing home care
  • Medical devices
  • Medical procedures

With Medicaid planning, you don’t spend down your own assets to cover your long-term care needs! You protect assets and create a secure and happy future with irrevocable Medicaid trusts.

Did you know that 70% of people 65 and older right now will need years of long-term care? No one wants to consider living in a nursing home, but the reality is that planning to not pay for it is better than planning to spend your life’s savings on it!

What is your plan to pay for long-term care’s boarding and medical costs?

With irrevocable Medicaid trusts, you can keep your assets and use them to pay for your needs without risking disqualification from Medicaid or spending down your assets to qualify!

Incorporating a Medicaid planning trust into your comprehensive estate plan is the smart way to protect your assets while still receiving Medicaid benefits.

A proper Medicaid trust needs a legal professional to include the appropriate language so that you can ensure protection from the costs of long-term care. Estate planning attorneys specialize in drawing up Medicaid asset protection trusts, so find someone locally to get started with your preparations!

Medicaid Trust Pros and Cons

The benefits of Medicaid planning are immense. Just a few reasons to get started include:

  • No future worries about how to pay for long-term care
  • Qualify for Medicaid without spending down your assets trying to become eligible.
  • You don’t pay for your long-term care
  • You can still use trust assets for your needs
  • No Medicaid Recovery claims on your estate when you pass away
  • Your family members get to keep your assets as their inheritance
  • Protection from capital gains taxes when family members inherit.

Now that we’ve discussed some of the main reasons to set up a Medicaid trust, let’s review a few potential drawbacks of Medicaid planning:

  • For the Medicaid asset protection trust to work, you must set it up at least 5 years before you need Medicaid to cover your long-term care.
  • You must give up control of your assets when you establish a Medicaid planning trust. Instead, your selected trustee distributes funds according to the trust’s terms that you establish with your estate planning attorney.
  • The Medicaid Trustee has discretion over how to use trust assets for your benefit.
  • It can be costly to set up and maintain a Medicaid planning trust.
  • If laws change in North Carolina, there is no guarantee that the trust will protect your assets from long-term care costs.

As you can see, there are pros and cons to opening a Medicaid trust. Weigh the advantages and disadvantages to decide if this planning tool is right for you. 

We Can Help

If you have questions about setting up a Medicaid trust in North Carolina or want assistance getting started with your estate planning, contact us at Vail Gardner Law today!

We can help you set up a clear and concise Medicaid trust and other estate planning documents to protect your future and your family! Contact us today to get started!