UTBF’s Elder Law Solutions ® team recently hosted an incredibly informative virtual Elder Law Program for our VIP clients.
Attendees raved that they learned a tremendous amount of valuable information, including:
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- The Rules for Qualifying for Medicaid
- How to Navigate the Five Year Look-back Period
- How to Use Medicaid Asset Protection Trusts (“MAPT”) to Protect Their Home and Other Assets
- The Additional Tax Savings and Asset Protection Benefits of MAPT Planning
The average cost of long term care in Pennsylvania is between $10,000.00 to $15,000.00 PER MONTH and is continuing to rise each year.
Without proactive planning, the assets that you worked hard to build and protect are at risk of being depleted at a staggering rate rather than passed on to your spouse, children, or grandchildren. Unfortunately, there is a lot of confusion surrounding elder law planning and what options you may have to protect your financial legacy for the next generation.
We structured our virtual Elder Law Program to help you (and your family) to understand elder law planning, your real options, and how to protect your assets with, or without, long term care insurance.
What is Medicaid for Long Term Care?
Medicaid is the federally funded state-run program that pays the nursing home expenses of those who no longer have sufficient assets of their own.
Medicaid for long term care is different than Medicare. Medicare is health insurance and only covers non-custodial medical care. Medicare does NOT cover long term nursing care.
What is the Five Year Lookback Period?
Medicaid is a means-based program, which means that you are only eligible if you have very few assets. The state does not want you to give away all of your assets on Tuesday in order to qualify for Medicaid on Wednesday, so it imposes a penalty on people who transfer assets without receiving a benefit or fair value in return.
States require a person applying for Medicaid to disclose all financial transactions he or she was involved in during the five years before the Medicaid application, in order to identify gifts/transfers. This five-year period is known as the “look-back period.”
How Can a MAPT Preserve My Assets for My Children and Grandchildren?
Gifting assets to a Medicaid Asset Protection Trust (“MAPT”) is the primary asset protection tool for clients who are planning ahead. A MAPT is an irrevocable trust that holds gifted assets during the lifetime of the Grantor (the person who gifted the assets) and allows a trusted loved one or friend to manage the assets during the Grantor’s lifetime.
A variety of different types of assets can be owned by a MAPT, including, but not limited to, real estate, stocks, bonds, mutual funds, business interests, and cash.
Five years and one day after each gift is made to a MAPT, the gifted asset(s) will be one hundred percent protected from nursing home spending.
Can a MAPT Also Save Inheritance Tax, Provide Protection Against Creditors, Lawsuits, and Divorce, and Facilitate Probate Avoidance for My Heirs?
The answer is yes, yes, and yes!
Because a MAPT precludes the Grantor from altering the trust dispositions and terminating the trust once it is created, it will generally not be taxed at death of the Grantor and cannot easily be reached by the Grantor’s creditors.
Assets that are transferred to an irrevocable Medicaid trust one year prior to the death of the person making the gift, will completely avoid Pennsylvania inheritance tax. This type of savings on qualifying gifts made to the trust can be up to $75,000 for every $500,000. Because Pennsylvania inheritance tax rates of transfers at death range between 4.5% and 15%, a properly drafted irrevocable Medicaid trust can reap huge inheritance tax savings.
Assets owned by the MAPT will also be protected from divorcing spouses, creditors, and lawsuits impacting children and other beneficiaries. Making gifts directly to your children makes the gifted assets vulnerable to outside forces in their lives. Utilizing MAPT planning can help to ensure that your children’s inheritance is protected during your lifetime and beyond.
An additional benefit of MAPT planning is probate avoidance. Assets owned by the MAPT will not require probate at the time of the death of the Grantor which helps to make the administration process much faster, easier, and less expensive.
If you are confused about “elder law,” asset protection trusts, Medicaid advance and emergency planning, and the process of trying to protect your assets for your family, then the UTBF Elder Law Program is an absolute must-watch.
To access a live recording of the presentation Click Here
