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Tampa Estate Planning Attorney > Blog > Asset Protection > Plan Now to Avoid Medicaid Problems

Plan Now to Avoid Medicaid Problems

For many with moderate to lower incomes, Medicaid can be the difference between life and death, and the difference between being able to get into a good long term care facility, or being left in the cold. Many people don’t realize it, but many financial decisions that they may make throughout their younger years may jeopardize the ability to obtain Medicaid if it is needed later on.

Medicaid Problems

Like many governmental programs, income eligibility for Medicaid can be so low that even those with moderate assets or income may end up ineligible for benefits when it’s time to apply. Many of us surely don’t have the resources to pay for long term medical care, but may also have too many assets to qualify for Medicaid.

One solution to this problem is what is known as a Medicaid Protection Trust (MPT). An MPT allows someone to deposit assets into a trust, but not have them be counted as assets for the purpose of determining Medicaid eligibility.

Let’s assume someone makes a moderate income, but is able to save $200 per month. Over time, that $200 will accrue and sit in an account somewhere. When it reaches a certain point, it could be so much that it disqualifies that person for Medicaid when an application is made–often, when someone needs to be admitted into a long term care facility.

The Benefits of a Trust

But if that money were put into an MPT, Medicaid couldn’t count it to determine eligibility. The person would be able to earn and save money without risking benefits later on.

An MPT has another benefit. Many people don’t realize that even if they do qualify for Medicaid, after they pass, Medicaid could make a claim on their assets to repay itself. That’s right—the government can come after your stuff after you pass to pay themselves back for what they paid through Medicaid.

Practically, the assets are being taken from your relatives, who will have lost to Medicaid the benefit of any property or assets you left them.

But an MPT can protect those assets from Medicaid’s reimbursement. Medicaid cannot collect on those assets when seeking repayment.

Plan Early

There’s a five-year lookback period, meaning only assets put in the trust 5 years before you apply for Medicaid get the MPT protections. That means you need to plan early. However, you may be able to structure the trust so that any family member that loans you money for your long term care can be paid back from the trust when the 5-year term expires.

Like most trusts, you can use any income derived from the trust, but you cannot utilize the principle. Doing so will jeopardize the MPT’s protections. Thus, people should not deposit money into an MPT that they anticipate needing.

Protect yourself, plan for your future, protect your relatives, and make sure you are maximizing your assets. Contact Tampa business, asset and probate attorney David Toback to discuss a comprehensive estate plan.

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