medicaid asset protection trust

Creating a Medicaid Asset Protection Trust to Protect Your Future

Preparing for the inevitable takes proper planning and thoughtful consideration.  This is especially true when it comes to the protection of your assets.  This includes protection from creditors, scammers, and medical expenses, or nursing care expenses.  This article briefly explains and discusses what a Medicaid Asset Protection Trust (MAPT) is, why it is important, and how it can be used.  This type of trust is also called by other names such as a Medicaid Planning trust, Medicaid Trust, or Home Protection Trust.

*This blog is for educational purposes only and should not be considered legal advice. The use of the Paths Law Firm website does not constitute a client-lawyer relationship.

A trust is a legal entity holding title to assets.  It is a written document, like a contract, with provisions or rules on how the assets titled in the trust are to be managed and used.  Different types of trusts have different provisions and different purposes.  Usually, we assign titles to trusts describing the purpose for which they’re being used.

All trusts have three positions, one is the “grantor”.  This is usually an individual or a married couple.  The grantor creates, or starts, the trust and may also be referred to as the settlor or the trustmaker.  The second position, in no particular order, is the “trustee”.  This may be an individual, a committee of persons, or a professional trustee, usually a bank.  This position is the manager of the assets held in trust and the one responsible for following the directions regarding who is to benefit from the trust and administering it.  Finally, the third position is the “beneficiary”.  It is common for trusts to have multiple beneficiaries and this position may consist of persons, organizations, or have an overall purpose.  This is the person or entity receiving the income or the principal (assets) of the trust.

There are many different types of trusts however not all trusts are Medicaid Asset Protection Trusts. Usually, a title for a trust is assigned to describe the overall general purpose of using the trust.  This may include an irrevocable life insurance trust, a qualified spousal trust, or even the more common revocable living trust.  This title will usually tell an experienced estate planner a lot when reviewing a plan.

medicaid asset protection trust

What is a Medicaid Asset Protection Trust?

A Medicaid Asset Protection Trust, or often referred to as a MAPT for convenience, can be a valuable planning strategy to help applicants meet Medicaid’s income and asset limits.  It is a tool used in elder law and designed to help seniors ensure their assets go to the intended beneficiary or heirs vs. being lost to the cost of care in the future.  This type of trust helps protect an applicant’s assets which would otherwise be counted in determining eligibility.  This trust is used to shield assets from nursing home care costs; however, some rules restrict the protection of the trust.  

One rule with which many people are familiar is the “5-year look-back period.”  Essentially, if any asset is transferred, whether as a gift to an individual or to MAPT, a penalty period will be assessed against the applicant.  During this penalty period, the applicant is not eligible for Medicaid benefits.  The length of the penalty period is determined by the value of the asset(s) transferred within 5 years of applying for Medicaid.

It is easiest if the assets are transferred to the trust and the trust is in place for 5 years before applying for Medicaid in order to meet the 5-year look-back period rule. However, most don’t know, but the law actually requires the penalty period to be assessed for transfers made for the purpose of qualifying for Medicaid.  An experienced attorney should help you understand how intervening factors, pre-existing conditions, and other factors impact this additional provision. 

planning for medicaid nursing care

How Does a Medicaid Protection Trust Work?

To better understand a MAPT, it is important to note the person creating the trust, referred to as a grantor, settlor, or trustmaker, should not be the trustee of the trust.  The adult children, grandchildren, or other family members can be trustee(s).  The trustee must follow the rules set by the trust, which specify how trust income and principal can be used.  Also, there are beneficiaries assigned to the trust.  The beneficiaries are the individuals who benefit from the trust.  Beneficiaries’ designations are very flexible and they may benefit from the trust during the grantor’s life or after the applicant’s death. 

For the MAPT to be compliant with Medicaid and for the assets held in the trust not to be considered when qualifying for Medicaid, the grantor cannot be a beneficiary of the trust principal, that is the assets of the trust.  If the grantor is a beneficiary, he or she would have direct access to the assets making them available to pay for care based on Medicaid’s rules. An experienced planner can discuss the options available to lessen the fears a grantor may have regarding access to their assets.

The trust must be irrevocable to be exempt from Medicaid’s income and asset limits.  Irrevocable means the trust cannot be changed or canceled once it has been put in place.  Once income and assets have been transferred to an irrevocable trust, they are no longer considered to be controlled by or owned by the grantor.  The trust will specifically restrict transferring any assets to or back to the grantor.  This is why revocable trusts (often referred to as “living trusts”) are still in the control of the grantor and therefore counted towards the grantor’s income and asset limits set by Medicaid.

medicaid planning trust

What Are the Benefits of a Medicaid Trust?

If you are considering a Medicaid Asset Protection Trust, it is important to plan as far in advance as possible.  This is because it cannot be used immediately by an individual applying for Medicaid benefits.  Remember the 5-year look-back provision.  If an individual needs Medicaid quickly there are other laws and strategies an experienced elder law attorney can implement.  

Below are a  few of the benefits of a Medicaid Trust: 

  • Allows the applicant to place income and assets over the Medicaid limits in the trust to help meet Medicaid’s requirements without having to spend down assets.
  • The assets in the trust are protected for beneficiaries listed by the trustee making them protected from estate recovery.   

Shortcomings of a Medicaid Trust:

  • The trust must be set up 5 years before an individual applies for Medicaid. 
  • Income and Assets transferred into the trust are not directly or solely controlled or owned by the grantor.  The assets cannot be transferred back if the grantor becomes well enough to return home.

medicaid asset protection trusts

What Assets Can be Put in a Medicaid Planning Trust?

Assets are placed in a Medicaid Asset Protection Trust are not counted towards the asset limit if the plan is properly done.  This can help individuals applying for Medicaid to qualify, as long as the trust has been in place for a sufficient amount of time or the other factors addressed above are met. 

Essentially any type of asset can be transferred to the trust.  Some assets are highly suggested to be transferred to the trust, but a couple of types of assets are not eligible to be transferred directly.  A recommended asset eligible to be placed in a Medicaid Asset Protection Trust for planning is an individual’s home.  When a grantor transfers their home into a Medicaid Asset Protection Trust, he or she may continue to live in the home and even sell the home and purchase a new one. 

Other assets suggested to be transferred to this type of trust include other real estate, checking and savings accounts, and investments.  Good guidelines to consider when deciding which assets to transfer are 1) any assets not likely needed for a year or so, and 2) it is better to transfer more assets, rather than less.  Retirement accounts, such as a 401K, IRA, and most annuities really cannot be titled in any trust because of tax implications which are best discussed with your attorney or financial advisor.

Another important factor of which to be aware of relates to income-generating assets.  If assets generate income in the Medicaid Asset Protection Trust, the grantor can collect the income generated, and the principal can continue to be protected.  Before choosing the income to be paid to the grantor, it should be considered if the income generated pushes an applicant over any benefit income limit.  Generally, when an individual is in a nursing home, any income produced by the principal in a Medicaid trust goes towards nursing home costs.  An advanced estate planning attorney can discuss the use of “spigot powers” to regulate or later control the income payments.

protecting assets from cost of care

Working with a Medicaid Planning Attorney

It is vitally important a trust is set up correctly.  There is no exception when it comes to a Medicaid Asset Protection Trust, which can be extraordinarily complex.  Because Medicaid rules change frequently it is recommended to work with an experienced elder law attorney who has a lot of knowledge and experience working with MAPT laws and the intricacies of trusts in general.  If a MAPT is set up incorrectly it could cause an individual to be ineligible for benefits through Medicaid, which defeats the purpose of creating this type of trust.

At Paths Elder Law, we focus on working with seniors and their families to ensure a brighter future.  We are deeply versed in the laws of Medicaid and understand how important it is to prepare for the future with the appropriate planning strategies.  If you or a loved one needs assistance protecting your assets with a Medicaid Asset Protection Trust or other planning strategies to protect your future, contact us to schedule a consultation.   Our experienced and caring staff will work with you to create a custom plan based on your circumstances and needs. 

Educational Seminar at Paths Law Firm

Paths Law Firm provides a Free Educational Elder Law Seminar every month to help you plan for your future.

Administrative Assistant

Ryan D. Foley

Ryan Foley at Paths Law

Administrative Assistant

Ryan D. Foley

Ryan graduated from the UMKC School of Law in 2018 and passed the Missouri Bar that year. Prior to law school, Ryan attended the University of Missouri – Columbia where he attained a degree in Business. He is a Kansas City native, growing up in the Northland where he achieved his Eagle Scout rank by doing a project for his high school. During his time in law school, Ryan was introduced to the practice area of Elder Law by one of his professors and has been

Ryan enjoys working with and educating clients to provide advocacy and support during the unfamiliar and often overwhelming probate process. Ryan understands the challenges faced by individuals when faced by the uncertainty and complexity of government systems or even handling a Trust during a time of grief, and he strives to make the process as easy as possible.

Administrative Assistant

Makaylee A. Morelli

administrative assistant at Paths Law

Administrative Assistant

Makaylee A. Morelli

Makaylee is currently working on her bachelor’s in political science and hopes to soon start law school as an aspiring attorney. In her free time, she loves to spend time with her friends and family but most importantly her dogs Taffyta, Tallulah Belle, and Harry. Their favorite thing to do is go on coffee dates and get pup cups.

Attorney

Kathleen E. Overton

Kathleen Overton, attorney at Paths Law

Attorney

Kathleen E. Overton

After starting her career as a disability attorney, Kathleen transitioned into estate planning at a mid-sized regional law firm. Kathleen joined Paths Law Firm in 2021 when she decided to return to a boutique law firm that provides excellent service and quality to clients. Because of her background as a disability attorney, she brings a thorough understanding of public benefits to each client meeting. At Paths Law FIrm, Kathleen focuses on traditional estate planning and business entity formation, providing tailored advice unique to each client’s situation.

Public Benefits Assistant

Tena K. Dooley

Public Benefits Assistant

Amanda D. Martin

I have my Associates in Applied Science and have over 20 years of office management experience. I have two daughters and one grandson.

During my time away from the office I enjoy spending time with my family.  I enjoy almost everything outdoors and my hobbies include fishing and gardening.

PARALEGAL

Sydney R. Morris

Paths Law elder law in Kansas City

PARALEGAL

Sydney

Sydney is currently enrolled at the University of Missouri-Kansas City pursuing an accounting degree and plans to later attend law school.

In her free time, Sydney enjoys spending time with her nephews and volunteering at her local church.

 

CLIENT SERVICES MANAGER

Christy L. Phillips

client service manager at Paths Law

CLIENT SERVICES MANAGER

Christy L. Phillips

Phone: 816-640-8635
Email: [email protected]

Christy has 3 years of experience in Elder Law working for seniors and their families as a Benefits Coordinator processing Medicaid and VA applications. Prior to joining Paths Law Firm Christy worked in the finance industry for over 10 years.

 

Christy’s experience in the finance industry has been extremely beneficial to her role as Benefits Coordinator. There have been many influences that went into her decision to select the field of Elder Law. Christy has a special place in her heart for the elderly and attributes this to her relationship with her grandparents.

When asked why she loves what she does, Christy said that at Paths Elder law, she gets the opportunity to help clients in more ways than one. Her favorite part of her job is getting clients approved for Medicaid or VA benefits as it is a huge relief for them and their loved ones.

Christy was raised in Ogden, Utah, and moved to Independence, MO, when she was ten years old. She has two children that keep her busy and fill her life with joy! Christy’s daughter cheers for Avila University, and her son plays competitive baseball for the Bucks and races BMX locally for the Motorcycle Closeout Team.

When Christy is not working, she enjoys crafting and making homemade gifts for her loved ones and raising her kids to be healthy, happy, and positive humans.

 

Practice Areas

  • Medicaid Benefits
  • VA Benefits

 

Professionalc Memberships and Affiliations

  • Missouri Notary

FINANCIAL MANAGER

René A. Fracassa

Rene A. Fracassa, Paths Law

FINANCIAL MANAGER

René

René has worked along side Rusty for 35 years. Not only is she part of the Paths team, she is also his wife. René spends her time working with the accountant to keep all of the finances in order, as well as general office management.

In addition to helping run the office, she helps manage the family and grandkids, tries to keep everyone fed, and has a passion to teach Bible Studies. Her former career in Event Planning trained her to juggle all the activity. She understands Rusty’s passion to serve people from the first mention of law school. It is a great pleasure for her to be an important part of every area of his life.

 

MARKETING MANAGER

Hilary R. Tichota

Hillary at Paths Law

MARKETING MANAGER

Hilary

Hilary plays a vital role in the daily operations of the office. In addition to her regular office duties, Hilary has a heart of gold.

For more than 5 years, Hilary has operated the front desk at Paths, running the office and catering to clients. Hilary recently moved into the role of Community Relations Coordinator. She has a passion for people and a focus to share our business practices with the community’s seniors, businesses, and clients. She especially has a heart for seniors, showing they are loved through her visits, treats, the “Pen to Pal” program, and volunteering services at various senior living communities. She is a wonderful wife and mother of two. Most activities with seniors involve her great talent for any type of craft.

 

SR. PARALEGAL & OPERATIONS MANAGER

Jennifer A. Bronson

Jennifer, senior paralegal

SR. PARALEGAL & OPERATIONS MANAGER

Jennifer

Jennifer has been in the legal field for over 25 years and considers Paths her second home.

When she’s not running the office or working for our clients, she’s spending time with her first passion – her children.

ATTORNEY

Russell A. Fracassa (Rusty)

attorney at Paths Law elder law

ATTORNEY

Russell A. Fracassa (Rusty)

Phone: 816-640-8635

When asked what he wants to do, his reply was “I just want to sit at the kitchen table and work directly with people.” Rusty enjoys working with clients providing experienced advocacy and supporting them through their unfamiliar and overwhelming situations. Due to all the challenges faced by seniors, it is essential to work with an experienced elder law attorney who has expertise in the law, issues, and concerns affecting seniors and their families.

Rusty brings nearly 30 years legal experience and expertise working for seniors and their families as an elder law attorney in Kansas City and surrounding. Prior to law school, Rusty was a practicing accountant. This provides invaluable experience in his current practice of law. Rusty decided to put his focus on helping the elderly, vulnerable adults, and their families navigate challenging life, end of life, and death events.

Rusty understands the challenges faced by individuals whose capacity is declining and how upsetting the loss of a loved one can be. He understands he may not be able to eliminate his client’s grief from loss, but he strives to provide clients with peace of mind. Rusty works directly with client’s long term care issues, including Medicaid, Veteran’s Benefits, Estate Planning, Asset Protection, and Special Needs Planning.

In 2010, Rusty’s faith and love led him and part of his family to China as Christian missionaries. He and his wife, went permanently, but ended up dedicating 3 years to that ministry. They returned to Missouri to help with grandchildren after a family tragedy and later began anew with Paths Elder Law. The goal is providing compassionate care through legal advocacy.

When Rusty is not practicing law, he enjoys spending time with his family, grandchildren, and excessive eating at local restaurants.

 

Practice Areas

 

  • Wills and Trusts
  • Estate Planning
  • Asset Protection
  • Medicaid Benefits
  • VA Benefits
  • Probate
  • Guardianship and Conservatorships
  • Education

 

BSBA and Master’s in Accounting, Master’s in Inter-Cultural Studies, and Doctorate in Juris Prudence

  • Rockhurst University
  • Liberty University
  • University of Missouri – Kansas City


Admissions to Practice

  • Missouri


Professional Memberships and Affiliations

  • State Bar of Missouri
  • National Academy of Elder Law Attorneys (long-time Member)
  • Elder Counsel (Charter and Ongoing Member)
  • Missouri Association of Trial Attorneys (Past Member)
  • Kansas City Metropolitan Bar Association
  • Missouri State Bar Committees – Elder Law, Estate Planning, Probate