It is a misconception that, in order to protect one’s assets from the cost of long-term care, an individual must transfer all of their assets to an irrevocable Medicaid asset protection trust (MAPT), significantly reducing the amount of non-retirement assets over which they have control and access. Fortunately, that is not the case for those who are proactive about doing elder law planning.
While it is true that, to financially qualify for Medicaid in the year 2024, one’s non-retirement assets must total below $31,175, this threshold must only be met if and when an individual applies for Medicaid home care or nursing home Medicaid. An individual need not deprive themselves of all of their assets prior to this point. However, one can (and should) begin the process of protecting certain assets when one has their mental faculties, is physically healthy, and is not in need of care.
The assets and income that an individual needs for day-to-day expenses are not typically what is transferred to a MAPT. It is also not necessary to transfer one’s retirement accounts to a MAPT, as retirement accounts are not counted as available resources for Medicaid eligibility. The assets that are excellent candidates for the transfer to a MAPT are one’s primary residence (wherein you retain the right to reside) and the liquid non-retirement assets that one is comfortable giving upon control over and that one wants to ensure will be protected against the cost of long-term care.
It may be helpful to visualize your assets in one of three buckets:
Bucket #1: This contains assets that you want to control and access often (e.g., a checking, brokerage, or savings account). They are frequently held in a Revocable Living Trust, which you would have full access and control over, and which avoids probate upon your demise.
Bucket #2: This contains your accounts. In New York State, the principal of a retirement account does not count toward the Medicaid financial eligibility threshold provided that the account is in pay status and the account owner is taking (and has not drawn in excess of) the Required Minimum Distribution (RMD) each year.
Bucket #3: This is the MAPT, into which you would transfer assets you are comfortable giving up control over and that you want to protect (e.g., real property or a large non-retirement brokerage account). If the real property is your residence, you can still reside there for the rest of your life or sell the property if needed; and if it turns out that you do need to access funds within the MAPT, there are ways that the monetary transfer can be undone.
Everything in Bucket #3 is fully protected for Medicaid purposes after five years, the assets in Bucket #2 are exempt from the outset, and the only exposure is what, if anything, remains in Bucket #1. With a little forethought and the help of an elder law attorney, protecting the bulk of your life savings from the cost of long-term care is achievable.
