As you age, the prospect of requiring nursing care rises. It is a reality that many Americans have to face – there were around 1.3 million Americans living in nursing homes in 2020 according to the Centers for Disease Control, with that number likely to double by 2050. Around 75,900 of those current nursing home residents are in Ohio.
You may end up as part of that statistic.
If that happens, you will also face enormous costs to maintain your nursing home care. In Ohio, a semi-private room you may have to share will set you back an average of $8,365 per month. A private room is even more expensive, costing $9,520 per month. Either way, you face a six-figure annual outlay if you require nursing home care, which is a massive burden on you, your estate, and your family.
Medicaid can help. The challenge is that Medicaid has its limits, with nursing home aid eligibility being determined by your current income and the value of any assets you own. That is where a Medicaid asset protection trust (MAPT) can help – this trust may help you safeguard your assets and claim Medicaid for a nursing home stay in Ohio.
What Is a Medicaid Asset Protection Trust?
A MAPT is a form of trust that can be an invaluable part of your estate planning if you need nursing home care, but the assets you own result in you exceeding eligibility limits. Simply put, the trust has a crucial purpose – protecting a Medicaid applicant’s assets from being considered during their application process. So, you can think of a MAPT as a trust to protect assets from nursing home Medicaid countable resources, with the trust acting much like any other trust.
For instance, any assets you place in a MAPT are no longer considered yours, with ownership passing to your trust and overseen by a trustee. Therein lies the estate planning aspect—the assets are guarded in the trust and will be passed to your beneficiaries when you die based on the instructions you create when building the MAPT.
This type of Medicaid protection trust differs from other trust vehicles – such as a living trust – because it is irrevocable. In other words, as the “grantor” or “settlor” of the trust, you cannot revoke the trust and have limitations to alter it once it has been created. That means you must be very careful regarding assets in this type of trust. This irrevocability is key – Medicaid considers any assets you hold in a revocable trust still owned by you, even if the trust says otherwise.
Beyond that, a MAPT operates similarly to any other trust. The grantor assigns a trustee who manages the assets held in the trust. They will also assign beneficiaries – typically children, other relatives, or close friends – who will receive the assets placed in the trust upon the grantor’s passing. A grantor should not act as a trustee or beneficiary of a trust asset or income as either designation gives the grantor access to the assets, which means Medicaid could consider them in its eligibility calculations.
The Medicaid Limits Defined
To better understand why some form of a Medicaid protection trust may be beneficial if you need nursing home care, we need only look at the eligibility criteria. Note that the following figures are accurate as of 2024 and may change in the future—the state of Ohio reexamines these figures annually.
First, single applicants.
To qualify for nursing home-related Medicaid, a single applicant must earn no more than $2,829 per month. This includes all income except for a Personal Needs Allowance of up to $50 per month. However, the real problem is the asset limit. A single applicant can only own assets with a maximum combined value of $2,000 or less.
The criteria relax slightly if you are married. When one spouse applies, the income limit remains the same for the Medicaid applicant, as does the asset limit. However, the assets owned by the spouse who will not enter the nursing home are also considered – those assets cannot total more than $154,140.
Finally, there are married couples in which both spouses need nursing home care. In these cases, the asset limit rises to $3,000—which incorporates the spouse’s shared assets—and the combined income limit is $5,658 per month.
You likely already see an apparent problem here. While the income limits seem somewhat reasonable, especially for a retiree, the asset limits are tiny. They are far too easy for the average person to exceed, making Medicaid assistance for the cost of care at a nursing home impossible to receive without a Medicaid Asset Protection Trust or other financial strategies in place.
What Assets Can You Place in a Medicaid Asset Protection Trust?
Assets you might consider placing into any other type of trust are eligible for placement in a MAPT. These include stocks, bonds, real estate, brokerage accounts, bank accounts, and mutual funds.
However, there is a catch:
The five-year look-back period.
A MAPT only protects your assets – and exempts them from Medicaid’s assessment of countable resources – if the assets have been held in the trust for at least five years. This is the length of the Medicaid “Look-Back Period,” which is essentially a period of time when Medicaid does a current and historical review of your assets to determine if you have money to pay for care or if you have transferred assets out of your name that should have been used to cover your cost of care. A Medicaid eligibility rule states that any assets you transfer (or otherwise gift) within five years of applying for aid would result in denial of the Medicaid benefit or result in a penalty period for eligibility.
So, you need to set up the MAPT – and transfer select assets into it – at least five years before you enter a nursing home. Failure to do so means your assets will not be protected from the Ohio Medicaid Recovery Act, through which the Ohio Department of Medicaid can seek repayment for the cost of Medicaid benefits offered upon your death. This act applies to any Medicaid recipient aged 55 or older who was permanently institutionalized – as is the case with nursing home care – and has passed away.
Why Create a Medicaid Asset Protection Trust?
A Medicaid Asset Protection Trust could protect your real estate and non-retirement liquid assets from the spend-down criteria required to qualify for Medicaid. The trust also ensures that the Ohio Department of Medicaid cannot claim against those assets upon your passing for the simple reason that the assets no longer belong to you – they are owned by the trust.
By this point, married couples may wonder if a MAPT is a good idea. After all, if there is a living spouse, your primary property is exempt from estate recovery. That exemption only lasts until both spouses have passed away – Medicaid could place a lien against the property for estate recovery purposes even if you pass it on to a beneficiary. So, a MAPT is essential to prevent Medicaid from recovering costs even if you are part of a married couple.
Ultimately, a MAPT provides valuable protection.
Placing assets into this type of trust helps you meet Medicaid’s nursing home eligibility criteria and prevents Medicaid from recovering costs via those assets later on. Your beneficiaries receive the total value of those assets without losing a large chunk to a Medicaid bill. And remember – nursing home care is costly in Ohio. Based on the figures shared earlier, a five-year stay will easily cost more than $500,000, meaning Medicaid recovery can easily swallow up the entire value of the assets you wish to pass on.
Set Up a Medicaid Asset Protection Trust Today
Working with an experienced Medicaid Asset Protection Trust attorney is essential. Chris Diedling is that attorney – get in touch today to discover how we can help you create a MAPT as part of your comprehensive estate plan.