What You Need to Know about a Medicaid Asset Protection Trust (MAPT)

Moving into a nursing home can be expensive, costing you $5,000 to $10,000 a month or more. This expense can quickly wipe out your life savings. Medicaid will pick up the bill for you if your income and assets are low enough to qualify for Medicaid benefits. The problem is, you typically have to be nearly destitute before you can qualify for Medicaid.  If you put your assets into a Medicaid Asset Protection Trust, however, you might be able to qualify for Medicaid, even if your assets exceed the limit. Here is what you need to know about a Medicaid Asset Protection Trust (MAPT).

Medicaid Income and Asset Limits

Eligibility for Medicaid varies by state. In general, you must have little or no income and few countable assets. Each state also may have non-economic requirements, such as age, disability and household size, depending on your circumstances.

Medicaid does not count all of your assets toward the asset limit. For example, if you or your spouse live in your primary house, Medicaid considers the home an exempt asset. The value of that property does not count toward your state’s asset limit. There may be limits on the amount of equity that does not count. The limits vary from state to state.

Additional examples of assets that can be exempt include one car, term life insurance, household furnishings, clothing, wedding and engagement rings and other personal items. Medicaid also does not count prepaid funeral and burial plans or life insurance policies with little cash value toward the limit.

However, Medicaid does count these things toward the asset limit:

  • Cash
  • Bank accounts
  • Investments
  • Vacation homes
  • Retirement accounts not yet in payout status (only in some states)

These are the general guidelines. Each state’s treatment of assets differ, and it is important that you or your estate planning attorney understand how those rules apply to your specific situation.

How a MAPT Works

A Medicaid Asset Protection Trust (MAPT) is an irrevocable trust. When you put your assets into the trust, Medicaid does not count those things toward the asset limit. You do not own those items – the trust does. Medicaid does not count assets that do not belong to you. The trust can protect the assets for distribution one day to your beneficiaries.

Please note that a “Medicaid Asset Protection Trust” can also go by the name of “Medicaid Planning Trust,” “Home Protection Trust,” or “Medicaid Trust.” Make sure that the trust you select is Medicaid-compliant. Most revocable living trusts, family trusts, irrevocable funeral trusts, and qualifying income trusts (QITs, also called Miller trusts) are not Medicaid-compliant. They will not protect your assets in the event you want to be eligible for Medicaid to pay for a nursing home.

Essential Aspects of MAPTs

MAPTs are sophisticated estate planning documents. Here are a few of the highlights of these documents:

  • You cannot create a MAPT and immediately apply for Medicaid. You will have to wait at least five years (2.5 years in California) before you apply for Medicaid, after setting up a MAPT. If you apply for Medicaid before this “look back” period expires, you could face harsh financial penalties.
  • You are the grantor of your trust. You state might use a different term, like the trust-maker or settlor. Your spouse cannot be the trustee of your MAPT, but your adult child or another relative can be.
  • The trust must be irrevocable. Once signed, you can never change or cancel the trust. You can never own those assets again. If you create a revocable trust, Medicaid will count all the assets in the trust toward the asset limit, because you still have control over the assets.
  • The trustee must follow the instructions of the trust. No funds of the trust can get used for your benefit.
  • A MAPT protects your assets from Medicaid estate recovery. Without a MAPT, after you die, the state could seek reimbursement from your estate for all the money they paid for your long-term care.
  • While a Miller trust will not protect your assets, it can protect some of your income, if your income exceeds the limit for Medicaid. Used with a MAPT, many people can qualify for Medicaid to help pay for the nursing home, even if their assets and income exceed the eligibility limits.
  • The rules for MAPTs vary from one state to the next.

The regulations are different in every state. You should talk to an elder law attorney in your area to see how your state varies from the general law of this article.

References:

American Council on Aging. “How Medicaid Planning Trusts Protect Assets and Homes from Estate Recovery.” (accessed December 19, 2019) https://www.medicaidplanningassistance.org/asset-protection-trusts/

American Council on Aging. “How to Spend Down Income and/or Assets to Become Medicaid Eligible.” (accessed December 19, 2019) https://www.medicaidplanningassistance.org/medicaid-spend-down/

Family Gatherings Often Reveal Changes in Aging Family Members

A look in the refrigerator finds expired foods and elderly family members are asking the same questions repeatedly. The same person who would never let you walk into the house with your shoes on now is living in a mess. The children agree Mom or Dad can’t live on their own anymore. It’s time to look into other options.

One of the biggest questions, according to the Cherokee Tribune & Ledger-News’ article is “How to pay for long-term care.”

The cost can depend significantly on the types of facilities being considered. There are many different options but the distinctions between them are often misunderstood. Assisted living facilities provide lodging, meals, assistance with eating, bathing, toileting, dressing, medication management, and transportation. However, a skilled nursing facility adds more comprehensive health care services. There’s also the personal care home, which provides assisted-living type accommodations, but on a smaller scale.

The question of how to pay for the residential care of an elderly family member weighs heavily on the family. That elderly person is often the one who did the caregiving for so many years, and the reversal of roles can be emotionally difficult.

There are a few different ways people pay for care for an elderly family member.

Long-term care insurance, or LTC insurance. Few elderly people have the insurance to cover their residential facility stay, but some do. Ask if such a policy exists, or go through the piles of paperwork to see if there is one. It will be worth the search.

Veteran’s benefits. If your loved one or their spouse served during certain times of war, is over 65 or is disabled and received an honorable discharge, he or she may be entitled to certain programs that pay for care through the Department of Veterans Affairs.

Private pay. If your loved one has financial accounts or other assets, they may need to pay the cost of their residential facility from these assets. If they don’t have assets, the family may wish to contribute to their care.

Apply for Medicaid/Medi-Cal. An elder law attorney in their state of residence will be able to help the individual and their family navigate the application, explore if there are any options to preserving assets like the family home, and help with the necessary legal strategy and documents that need to be prepared.

Meet with an elder law estate planning attorney to learn what the steps are to help your elderly loved one enjoy their quality of life, as they move into this next phase of their life.

Reference: Cherokee Tribune & Ledger-News (November 30, 2019) “How to pay for longterm care.”

How to Plan for Long-Term Care Costs

The odds are that most of us will need long-term care. At least 52% of those over age 65 will need some type of long-term care at some point in our lives, according to a study conducted by AARP. As most of us are living longer, we’ll probably need that care for a longer period of time, as reported in the article “It’s best to plan for long-term care” from the Times Herald-Record.

Many people 55 and older tend to believe that they might be in the group that won’t need any sort of long-term care. Here’s the problem: ignore this issue, and it won’t go away. It is true that turning a blind eye can be tempting because the size of the problem makes it a bit overwhelming, and the cost to tackle it seems unsolvable. However, not addressing it becomes even more expensive. How can we possibly pay for long-term care insurance?

Here’s a simple example: a 64-year-old woman fell and broke her ankle in three places. She was otherwise healthy and mobile prior to the fall. However, a badly broken ankle required extensive rehabilitation and she was not able to stay in her home. She has been living at a rehabilitation center and the costs are mounting. What could she have done?

There are two basic ways (with a number of variations) to pay for long-term care.

The first and most obvious: purchase a long-term care insurance policy. Only 2.7 million Americans own these policies. They are wise to protect themselves and their families.

Most families put off buying this kind of insurance because it’s expensive at any age and stage. The average cost is about $2,170, according to the Kiplinger Retirement Report, for about $328,000 worth of insurance. That rate varies, and it should be noted that if you have a chronic condition, you may not be able to purchase a policy at all.

If local nursing homes costs $216,000 per year and you have $328,000 of coverage, the numbers make it obvious that you will likely run out of coverage before your needs are fully met. The average nursing home stay is about two years. As boomers age, the cost of long-term care insurance is rising, while benefits are becoming skimpier, says Kiplinger.

There are some alternatives: a hybrid life insurance plan that includes long-term care coverage.  However, those can be more expensive than regular long-term care insurance, with the cost sometimes being about $8,000 a year for a 55-year-old and about $13,000 for a 65-year-old.

Another choice: a Medicaid Asset Protection Trust. For best results, you’ll need to work with an estate planning attorney to create and fund this trust long before you actually need it. Your assets must be placed in the trust at least five years before an application to Medicaid, which will then pay for your care. You don’t have to live in complete poverty to do this. If the care is for one person, the applicant is permitted to keep a certain amount of assets, which vary depending on your specific state laws (in California, that amount is $2,000). The Medicaid rules also provide a number of noncountable resources, which means that those items won’t be counted against your asset limits. This includes a home, the value of retirement accounts, and term life insurance.  The spouse may also keep assets of their own up to about $120,000, although this number also varies by state.

However, what if you have money to pay or need long-term care before you put assets in trust? If you live in New York, Florida and Connecticut, you have what is called “spousal refusal.” The spouse of the person in long-term care can choose not to pay for their cost of care. This can get complicated, and Medicaid will try to get funds for the care. However, an estate planning elder law attorney can negotiate the amount of payment, which may leave the bulk of your estate intact.

These are complicated matters that become very costly, often at a time when you and your family are least able to deal with yet another issue. Speak with an estate planning attorney before you need the care and learn how they can help you protect your spouse and your assets.

Reference: Times Herald-Record (July 22, 2019) “It’s best to plan for long-term care”

Prior Planning for Catasrophes

None of us know what kind of unexpected surprises will occur in our lives. We’d like to believe they will all be happy events, like winning the big Power Ball jackpot. However, unpleasant things like illness or a flood or fire often occur. We never think it will happen to us, says The Dalles Chronicle’s article “Prepare now for emergencies.” Unfortunately, these things do happen, and when they do, being prepared can make all the difference between a stressful situation and a really awful situation that could have been made, well, less awful.

For starters, have you met with an estate planning attorney to create a comprehensive estate plan that includes a will or trust, a financial power of attorney and a health care power of attorney? The will/trust concerns distribution of your possessions and property, the power of attorney gives a trusted person the ability to take financial and legal actions on your behalf in the event that you become incapacitated, and the medical power of attorney allows someone to make health care decisions for you if you become incapacitated. There are also many other tools that an estate planning attorney can help you with, such as a Special Needs Trust, if your family includes a family member with special needs, or other trusts if they are needed.

Next, your emergency preparations should include having important documents assembled in a notebook, on a memory stick and/or a safe location. Imagine there was an emergency evacuation and you had to leave your home immediately. What documents would you need? Here’s a helpful checklist to look at:

  • Contact information for family members, doctors, attorneys, dentist, insurance broker, financial advisor.
  • Cash, so if ATMs are not working, you will have cash on hand.
  • Identification documents, including originals of your birth certificate, marriage license, divorce papers, passport, Social Security card, health insurance cards (or Medicare or Medicaid cards).
  • A video of your home and all of your possessions on your mobile phone. Consider emailing it to a family member or friend who lives in a different location.
  • Insurance policies for home, auto, disability, long-term care, etc. Include contact information for either 800-numbers or your local agent, if you need to file a claim.
  • A copy of recent financial statements for credit cards, banks, brokerage firms, retirement accounts, car loans, mortgage and similar types of accounts.
  • Copies of the last three years of tax returns. If you work with a CPA, they should have them on a secure portal, but a hard copy will be useful to have.
  • Legal documents for your estate plan, including the will, power of attorney and health care power of attorney, as described above.
  • Other legal documents, including car registration, car title and property deed to your home.

These documents should all be organized in a folder that is placed in your home where you and your spouse know where it is and can grab it on your way out the door.

One more item that should be noted in this digital age: if you use a laptop or tablet that contains websites that you use frequently for personal finance, investments, etc., be mindful of its location in the house, so you can grab it (along with a charger cable) quickly. If you have passwords for accounts—and most of us do—you should print them out and include them in your file folder for easy access. You can almost always re-set a password, but how much easier will rebuilding your life be if you have them on hand?

If you do ever face a catastrophic emergency, having these materials will save you hours of time and stress.

Reference: The Dalles Chronicle (July 16, 2019) “Prepare now for emergencies”

Social Security Error and Medicare Coverage: This One’s Not a Scam

A “processing error” by the Social Security Administration has caused 250,000 benefit checks to be issued in January without deducting the proper Medicare premiums. As a result, the Social Security Administration is sending all those people a bill for as many as five months of Medicare premiums they thought had already been deducted. It turns out the Social Security Administration did not pay the insurance plans, reports NPR in “Social Security Error Jeopardizes Medicare Coverage for 250,000 Seniors” The problem applies to private drug policies and Medicare Advantage plans that provide medical and drug coverage and are substitutes for traditional government-run Medicare.

Some people will need to find the money to pay the plans, while others may already have their plans cancelled as a result of non-payment and will need to fight to have them reinstated.

Both Medicare and Social Security expect proper deductions and payments to resume either this month or next. Insurers are required to send bills directly to members for unpaid premiums, says Medicare.

Neither Medicare nor Social Security would explain how or why the error occurred or provide the specific names of the plans that were shortchanged. They also didn’t give the amount that the plans were owed. There is a notice to Medicare’s beneficiaries on the website, but it is lacking in detail.  The House Ways and Means Chair, Rep. Richard Neal, hasn’t received any response from either agency.

Organizations that represent seniors are getting some questions from their members who are Medicare beneficiaries. Two women in Louisiana lost drug coverage after their policies were canceled as a direct result of the error. A woman in Ohio was reinstated in fewer than 48 hours, after the state’s insurance information program for seniors got involved.

Some people may not have noticed that their Social Security checks did not include a deduction for their Medicaid Advantage or drug plan premiums. Some people may have thought the extra amount was an expected cost-of-living increase.

Medicare beneficiaries have had the option of paying premiums through a deduction from their Social Security benefit checks for more than a decade. They can also pay directly through a credit card or a checking account instead of from their Social Security benefits.

Insurance companies that have members who were affected by this must allow their members at least two months from the billing date to pay amounts they owe on premiums. In addition, they must also offer a payment plan for those who can’t pay several months of premiums at once. These are the requirements that acting director for the Medicare Plan Payment Group says companies must take to avoid invoking their policy of disenrollment if the member fails to pay a premium while the member is adhering to the payment plan. The federal policy director of the Medicare Rights Center, an advocacy group, is concerned that older adults will view their bills with suspicion, which could lead to further problems.

Reference: NPR (June 6, 2019) “Social Security Error Jeopardizes Medicare Coverage for 250,000 Seniors”

Worried about a Spouse Needing Nursing Home Care?

Worried about a Spouse Needing Nursing Home Care?
couple bored in retirement

The six-figure cost of nursing home care is worrisome for those who are married, when a spouse has to go to a nursing home. In the example above, Tom has had some major health issues in the past year and Louise is no longer able to care for him at home.

In this case, the couple live in Pennsylvania, where nursing home care statewide is $126,420 a year ($342.58 per day). The state has a Medical Assistance program that is a joint state-federal program that will pay for nursing home care, if a person meets both the medical and financial criteria.

Tom has met one of the major Medical Assistance threshold requirements, because he is “nursing home facility clinically eligible,” which means that a doctor has certified that due to illness, injury or disability, Tom requires the level of care and services that can only be provided in a nursing home.

What will happen to their assets?

In 1988, Congress passed the Medicare Catastrophic Coverage Act, which created a process of allocating income and resources between a spouse who needs to live in an institutional setting and the spouse who can continue to remain in a community setting.

Tom and Louise’s resources are divided into two buckets: one that is exempt and the second that is non-exempt.

The family home, care, and cost of a pre-paid funeral, if that has been done, are exempt or non-countable assets.

Everything else, whether they own it together or individually, is considered non-exempt. In Pennsylvania, Louise’s IRA is the exception. However, that is not the same in every state.

Louise is entitled to keep one half of what they own, with a maximum of $126,420, as of January 1, 2019. This is her “community spouse resource allowance.”

Anything else they own, is used to pay for Tom’s nursing home care or purchase a very select group of “exempt” assets, like a replacement car or the cost of a prepaid burial.

They would have needed to give away their resources, at least five years preceding an application for Medical Assistance. If they have given money away in an attempt to preserve some of their assets, that would have changed the timeline for Tom’s being eligible for care.

Louise needs income to live on, so that she is not impoverished. She is entitled to a monthly minimum maintenance needs allowance of $2,058 and a maximum needs allowance of $3,150.50. These numbers are federally adjusted and based on inflation.

The numbers that must be examined for Louise’s income are her Social Security benefits, Tom’s Social Security benefits, any pension either of the two may have and any other income sources. She can keep her income, as long as she does not go over a certain level.

Sounds scary? It is. This is why it is so important to do advance planning for nursing home care, and have an ongoing working relationship with an attorney with experience in estate planning and elder law. There are changes over time to address the changing circumstances that life and aging present.

Reference: Pittsburgh Post-Gazette (April 29, 2019) “Married and concerned about one of you going to a nursing home?”

How to Pay for Assisted Living or a Nursing Home

Senior living can be costly, but with a little creativity, you can find multiple options to help you pay for the Assisted Living or a Nursing Home expense. You might also not need as much money as you think as Senior housing developments include some costs that you have to pay for out of pocket, while you still live in your own home.

For example, if you pay $100 a month to have your grass cut, you will most likely not have this item as a separate expense at the facility. If your monthly bill at the senior housing development includes some meals, that service will replace some of your current costs as well. Nonetheless, you will need to figure out how to pay for assisted living or a nursing home. Here are some options:

Current Income

Some people have enough money from their current income to pay for living in a senior community. For example, a person who receives $2,000 a month from Social Security, $4,000 a month from an annuity, and $1,000 a month in interest, dividends and investment income can use current income to pay for a facility that charges up to $7,000 a month.

Savings

For many people, current income is insufficient to cover the entire cost of a senior housing development. Let’s say that your current income is $3,000 a month and the assisted living center charges $5,000 a month. If you have enough savings, you can supplement your income to make up the difference. At $2,000 a month, you will have to spend $24,000 a year of your savings to live in senior housing.

Proceeds from Sale of the Home

Quite a few people plan to sell the large family home and downsize into a senior apartment or other development, when they retire. Proceeds from the sale of your home can go a long way toward helping to pay for senior housing, depending on the amount of equity in your house.

Reverse Mortgage

Reverse mortgages are not for everyone. There have been shocking scandals, in which unscrupulous lenders heartlessly took the entire nest eggs of older adults who did not understand all the terms and conditions of reverse mortgages. Be sure to check with multiple sources, like your state’s attorney general office and a trusted financial advisor who has nothing to gain from you getting a reverse mortgage, before agreeing to one of these arrangements. Read every word of all the documents and do not sign until you understand every detail. But these tools can be incredibly effective for the right situation and with the right advisor.

Bridge Loan

If you find yourself in urgent need of assisted living, you might get a bridge loan to cover the costs of senior housing until your house sells. Compare the interest rate and terms of a bridge loan to a home equity line of credit.

Military Benefits

If you or your spouse served in the military, you might be eligible for Veterans Administration (VA) programs like Aid and Attendance. This program can help pay for nursing home care, assisted living, in-home care and memory care.

Long-term Care Insurance

Although fewer than three percent of Americans buy long-term care insurance, those who do can use the benefits to pay for assisted living, memory care, or a nursing home, depending on the coverage. Be sure to read the terms of the policy with great care, particularly about how long you can receive benefits and for what services.

Medicaid

After you spend down most of your assets, you might qualify for Medicaid. No organization pays for more people to live in senior housing than Medicaid does. Every state has a different Medicaid program, and each one has its own eligibility requirements. It is a good idea to talk with an elder law attorney in your area about how your state’s regulations differ from the general law of this article. But of course, before spending it all down, research your options to be sure that you are making informed decisions to pay for Assisted Living or a Nursing Home.

If you are assisting a loved one with their planning, be sure to research all options.

References:

A Place for Mom. “How to Finance.” (accessed April 14, 2019) https://www.aplaceformom.com/planning-and-advice/articles/financial-assistance

Why Is Everyone Retiring to Florida?

A recent report by WalletHub ranks Florida as the best place to retire in terms of affordability, health-related factors and overall quality of life. According to the U.S. Census’ 2017 Population Estimates Program, roughly a half-million Miami-Dade County residents are over the age of 65, and by 2040, 1 in 5 Americans will be over the age of 65, according to the annual report produced by the Administration for Community Living.

Advances in medicine are helping with longevity, but various improvements in diet and lifestyle have also helped, says The Miami Herald in the article “Plan now on ways to take care of yourself through a long retirement.”

It’s important to keep your lifestyle through retirement, and it’s an essential part of any financial plan. You’ll need to budget for plans or services that help you in your later years, such as everyday tasks, medical care, or even where you live.

Take some time to consider how you want your later years to look, like where you would want to live—whether that’s at home (possibly with live-in help) or in an assisted-living facility. With our longer life spans, we encounter more significant health risks, like cognitive issues. According to research, 37% of people over the age of 85 have some mild impairment and about one-third have dementia. The Alzheimer’s Association says that 540,000 people aged 65 and older reported living with Alzheimer’s in Florida in 2018. Roughly 15% of those in Florida hospice care had a diagnosis of dementia in 2015. Therefore, you can see why it is critical to think about this now and communicate your long-term needs to your family.

As we get older, the ability to maintain a lifestyle we like can become a financial challenge. This is especially true if we also face an unexpected health condition. Making wise decisions now can have a dramatic impact on what those later years will look like. Saving for a lengthy retirement can help you prepare to face any potential issues that may arise.

Making provisions for your family and leaving a legacy, isn’t always an easy task. However, the financial security of your family may depend not only on how you manage your wealth today but also on how you protect and preserve it for the future. Your estate plan can help you prepare now to provide for your loved ones in the future.

Talk to your family and your estate planning attorney about these issues and ensure that your legacy planning is up to date, by regularly updating your will, trust, or advanced medical directives.

Reference: Miami Herald (February 1, 2019) “Plan now on ways to take care of yourself through a long retirement”