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Medicaid Asset Protection Trusts

October 3, 2022 General

Long term care expenses are the most significant financial risk for the majority of individuals as they age.  With the average cost of nursing home care in Connecticut exceeding $15,000 per month, and even in home 24/7 care costs exceeding $8,000 per month, many individuals can not afford to pay for these care expenses without significantly and adversely impacting their spouse and family.  For many individuals, part of the solution is utilizing what is commonly called a Medicaid Asset Protection Trust (“MAPT”). 

A MAPT is an irrevocable trust that seeks to exempt assets and permit qualification for Medicaid coverage for long term care expenses.  The MAPT must be established and funded at least five (5) years prior to seeking Medicaid coverage.  The most commonly transferred asset into the MAPT is the primary residence and/or vacation home(s).  Transfers can be structured in such a way that the transferor(s) can continue to live in the home, pay and deduct the carrying expenses of the property, such as real estate taxes, insurance, repairs and utilities, and even qualify for the capital gains exclusion on the sale of a principal residence.  After the five (5) year lookback period, the home is exempt for purposes of qualifying for Medicaid.  Should the transferor(s) desire to sell the home and buy a new home, the Trust permits the replacement of the property and allows for qualification of the capital gains exclusion provided the transferor(s) satisfy the normal requirements for this exclusion. 

Although the MAPT is irrevocable, it is usually drafted with provisions to permit the transferor(s) to modify the beneficiaries upon death through retained limited powers of appointment.  These retained powers permit the transferor(s) to appoint the trust assets to or for the benefit of certain classes of beneficiaries, thereby creating flexibility in case of changes in circumstances. 

If you wish to discuss the potential utilization of a trust for Medicaid planning purposes, we welcome you to contact Simon J. Lebo or any of the Elder Law attorneys at Brown, Paindiris & Scott, LLP.