Brown Borkowski & Morrow


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Benefits of setting up a Medicaid trust

A Medicaid asset protection trust (MAPT) presents an option to people hoping to shield their estates from the expenses of long-term nursing home care. As an irrevocable trust, the MAPT permanently shifts assets out of your control and into the management of the trustee. This act removes assets, like investment accounts or real estate, from your personal balance sheet so that you could qualify for Medicaid benefits that would pay a Michigan nursing home. Qualification for Medicaid benefits relies on you having little to no income or assets.

You choose who receives your assets

An MAPT names your beneficiaries and what and when they receive disbursements. A trust created by someone with comprehensive knowledge of Medicaid planning could let you decide the fate of your assets instead of leaving them exposed to nursing home collections.

Compare this to leaving your assets in your name. When you need to enter a nursing home, your assets would prevent you from qualifying for Medicaid. You would then have to liquidate your estate to pay a nursing home.

To meet legal requirements, you must set up an MAPT at least five years before entering a nursing home. State officials inspect Medicaid applicants’ financial activity for five previous years to detect attempts to move assets.

Potential tax advantages

Sometimes people selling their assets end up owing capital gains taxes. Transferring your assets into a trust does not trigger any capital gains taxes.

Avoid estate recovery

The Medicaid system has the legal right to take assets from people after their deaths to recover money paid to nursing homes. The state does this during probate for your estate. A probate court, however, does not oversee assets held in trust. In this way, the trust shields assets from a state seizure.