As we age, various government programs exist to help us cover the cost of living when income is no longer available. Retiring early enough to be able to enjoy retired life remains high on the list of concerns for Americans today. If this is an important issue for you and your family then you should read on.
Most people think of estate planning as a tool to ensure everything you worked for is left in the right hands. This is true – but effective estate planning can accomplish far more than just this. Through estate planning, you can preserve eligibility for Medicaid which could mean saving tens of thousands of dollars (or more) in retirement. Not only does this serve you in retirement but it also allows you to preserve more of your money for heirs and loved ones.
Using a Medicaid Asset Protection Trust
This brings us to the Medicaid Asset Protection Trust (MAPT). This irrevocable trust does exactly as the title suggests – protecting assets with Medicaid in mind. As with any other irrevocable trust, the assets you place within a MAPT must remain in the trust and be passed to the chosen trustee/beneficiary according to the details of the trust.
Irrevocable trusts do present a lack of flexibility, so there is slightly more risk involved. However, the benefit far outweighs this risk. In considering your eligibility for Medicaid, the government will not include the value of the assets placed into your MAPT in their calculations… as long as you execute the trust by the deadline.
Medicaid Asset Protection Trust Look Back Window
The timing element of Medicaid Asset Protection Trusts is crucial. When considering eligibility for Medicaid, the government does not just look at where you are financially at that moment. Instead, the government will “look back” at the last five years of your life.
If you were ineligible for Medicaid at any point during those five years then you will be ineligible at the time of application. This means you would either need to forgo the Medicaid benefits, accept a penalty period, or apply again when the look-back window would not render you ineligible.
When you establish your MAPT, it’s imperative that you execute and fully fund the trust early enough that you will be free to apply for Medicaid five years down the line. Doing so also ensures those assets cannot be seized to cover the costs of long-term care should you end up being unable to afford the care you receive.
Executing a Medicaid Asset Protection Trust in California
At Solan, Park & Robello, we care for your future. This means using all the tools available in your estate plan to ensure an effective strategy in retirement. Establishing and managing a MAPT may seem simple, but there are certain assets and investment accounts that cannot be transferred into one.
Navigating this on your own can create unique and unforeseen challenges. Contact our team and we will walk you through the process so you and your loved ones can enjoy the care you deserve in retirement.