As our population ages, the need for long-term care services has never been greater. With increasing life expectancies and a growing number of seniors, the demand for assisted living facilities, in-home care, and nursing homes is skyrocketing. However, the costs associated with these services can be staggering, often depleting a lifetime's worth of savings and threatening the financial security of even the most well-prepared families.

In this comprehensive guide, we'll explore the growing crisis of long-term care costs, the role of Medicaid in providing a solution for middle-class families, and how Medicaid Asset Protection Trusts (MAPTs) can help you preserve your hard-earned assets while still qualifying for crucial long-term care benefits.

The Rising Tide of Long-Term Care Needs

According to the U.S. Department of Health and Human Services, someone turning 65 today has an almost 70% chance of needing some type of long-term care services in their remaining years. This could include assistance with daily activities like bathing, dressing, and eating, or more intensive care provided in a nursing home or assisted living facility. 

The costs associated with these services are staggering. At the time of this article, the average cost of a semi-private room in a nursing home in Minnesota is over $123,000 per year. On the gulf coast of  Florida, it is over $125,000 per year.  In-home care services can also be costly, with the average for a home health aide in Minnesota over $77,000 per year and over $80,000 on the gulf coast of Florida. And these costs continue to skyrocket.

These expenses can quickly deplete even the most well-funded retirement accounts and investment portfolios, leaving families scrambling to find ways to cover the costs without sacrificing their financial security or depleting their life savings.

A study done by the Nonpartisan and Objective Research Organization “NORC” at the University of Chicago in 2019 and updated in 2022 writes, “over three-quarters of middle-class seniors will be priced out of assisted living by 2033.” It should be noted that the quote refers to assisted living, which is less than half the price of a semi-private room in a nursing home. The study goes on to state that middle-income seniors have income and assets that make them less likely to qualify for government benefits (which we’ll discuss in greater detail below). At the same time, they are not likely to have adequate resources to pay for the rising costs of the housing and care options they need.

The study looked at the combined assets of most middle-income Americans, including income streams such as social security, retirement accounts and other investments and determined they were simply not enough to cover the costs. It goes on to note that, even after selling their homes, seniors will struggle to pay for assisted living or require additional help from family members. 

The Role of Medicaid in Long-Term Care

Medicaid is now the number one solution for middle class families for paying for long-term care. Medicaid is a joint federal and state program that provides health coverage to millions of Americans, including those who have exhausted their financial resources on costly medical care.

To qualify for Medicaid's long-term care benefits, individuals must meet strict income and asset limits. In most states, an individual must have no more than $2,000 in countable assets (excluding some exempt assets), while the limit for married couples is slightly higher but still relatively low.

Once an individual or couple has "spent down" their assets below these thresholds, they can become eligible for Medicaid coverage, which can help pay for long-term care services in a nursing home, assisted living facility, or even at home.

The Estate Recovery Process: Protecting Your Legacy

While Medicaid can provide a much-needed lifeline for families facing astronomical long-term care costs, there is a catch – the estate recovery process. After the Medicaid recipient passes away, the state can attempt to recover the costs of care from the recipient's estate.

This means that assets like the family home, savings accounts, investments, and other valuable possessions that may have been intended as an inheritance for loved ones could be sold or liquidated to reimburse the state for Medicaid expenses paid on the recipient's behalf.

The estate recovery process can significantly diminish or even eliminate the inheritance that families had hoped to leave behind, threatening the financial security of future generations and potentially undermining a lifetime of careful planning and saving.

Medicaid Asset Protection Trusts: A Legal Solution

Fortunately, federal law provides a legal way to protect your assets and still qualify for Medicaid's long-term care benefits: the Medicaid Asset Protection Trust (MAPT).

A MAPT is a type of irrevocable trust that allows you to transfer your assets out of your name while still benefiting from them during your lifetime. By placing your assets into a properly structured MAPT, you effectively remove them from your countable resources for Medicaid eligibility purposes.

This means that even if you have a substantial amount of wealth, you can still qualify for Medicaid's long-term care benefits without depleting your life savings, selling your home, or liquidating other valuable assets.

How Medicaid Asset Protection Trusts Work

Setting up a MAPT involves transferring your assets, such as your home, bank accounts, investments, and other valuable possessions, into an irrevocable trust. Once the assets are in the trust, you no longer legally own them, but you can still benefit from them during your lifetime through the trust's terms.

The trust is structured to protect the assets from being counted as resources for Medicaid eligibility purposes. Upon your passing, the remaining assets in the trust can then be distributed to your chosen beneficiaries, such as your children or grandchildren, without being subject to the estate recovery process.

It's important to note that there is a "look-back" period (currently 60 months / 5 years) associated with MAPTs. This means that if you transfer assets into the trust within a certain period before applying for Medicaid, a penalty period may be imposed during which you will not be eligible for benefits.

Benefits of Medicaid Asset Protection Trusts

Medicaid Asset Protection Trusts offer several significant benefits for those seeking to protect their assets from long-term care costs while still qualifying for crucial Medicaid benefits:

1. Asset Protection: By transferring your assets into a MAPT, you effectively remove them from your countable resources for Medicaid eligibility purposes. This means that even if you have a substantial amount of wealth, you can still qualify for Medicaid's long-term care benefits without depleting your life savings or selling your home.

2. Legacy Preservation: MAPTs can help preserve your assets for your intended beneficiaries, such as your children or grandchildren. By placing your assets in the trust, they are shielded from the estate recovery process that Medicaid typically employs after a recipient's passing to recoup the costs of care.

3. Avoid "Spending Down": Without proper planning, many families are forced to "spend down" their assets to below the strict Medicaid eligibility limits before they can receive benefits. MAPTs allow you to protect your assets without having to exhaust your life savings or liquidate valuable possessions.

4. Maintain Benefit During Lifetime: While the assets in the MAPT are technically out of your direct ownership, the trust can be structured to provide income and support for you and your spouse during your lifetimes. This allows you to continue benefiting from your assets while still protecting them for the future.

5. Plan Ahead: By establishing a MAPT well in advance of needing long-term care services, you can ensure that your assets are properly protected and that you have met the look-back period requirements for Medicaid eligibility.

Drawbacks and Considerations

While Medicaid Asset Protection Trusts offer numerous benefits for those seeking to protect their assets from long-term care costs, there are also some potential drawbacks and considerations to keep in mind:

1. Loss of Direct Control: When you transfer assets into a MAPT, you relinquish direct ownership and control over those assets. While the trust can be structured to provide income and support for you during your lifetime, you no longer have the ability to directly manage or make decisions about those assets.

2. Potential Tax Implications: Depending on the specific assets transferred and the trust's structure, there may be tax implications associated with establishing a MAPT. It's important to work with an experienced attorney and financial advisor to understand and plan for any potential tax consequences.

3. Advance Planning Required: Due to the look-back period associated with MAPTs, it's crucial to plan well in advance of needing long-term care services. Typically, assets must be transferred into the trust at least five years before applying for Medicaid to avoid penalty periods of ineligibility.

4. Legal and Setup Costs: While the costs of setting up a MAPT are often far less than the potential long-term care expenses, there are still legal fees and other costs associated with establishing and maintaining the trust. It's important to factor these costs into your overall financial planning. For a comprehensive long-term care plan, including a MAPT, you should anticipate paying the equivalent of one-month of a nursing home for an experienced elder law attorney. However, that will likely protect hundreds of thousands of dollars for you and your family.

5. Irrevocable Nature: Once assets are transferred into a MAPT, the trust is irrevocable, meaning that you cannot easily undo the transfer or regain direct control over the assets. This underscores the importance of careful planning and consideration before establishing a MAPT.

A Family Asset Protection Trust: An Enhanced MAPT

At our firm, we provide an enhanced version of the MAPT for our clients and their families. By incorporating asset protection and tax strategies we use for our high net worth families, we can create a MAPT that is more flexible, tax efficient and provides greater protection that we call a Family Asset Protection Trust. For example, our Family Asset Protection Trust contains provisions that can protect the money you leave for your children and grandchildren in the event they get divorced, get sued, are forced into bankruptcy due to unforeseen medical expenses or are themselves also receiving government benefits. As people are living longer, I have worked with a number of families where a parent and one or more of their kids are all receiving Medicaid benefits due to long-term care needs. Our Family Asset Protection Trust plans ahead.

The Investment vs. The Cost

While setting up a MAPT does involve legal fees and costs, it's essential to weigh these expenses against the potential loss of your entire life savings and family home. Without proper planning, the costs of long-term care can quickly deplete even a substantial nest egg, leaving little to no inheritance for your loved ones.

By working with an experienced elder law attorney, you can determine if a Medicaid Asset Protection Trust is the right solution for your unique situation. The investment in protecting your assets now can pay dividends in the form of peace of mind and a secure legacy for your family's future.

In conclusion, Medicaid Asset Protection Trusts offer a legal and effective way to safeguard your hard-earned assets while still qualifying for the long-term care benefits provided by Medicaid.

If you would like to create a plan to protect your home and life savings, call us today at our Florida office at (941) 909-4644 or our Minnetonka, Minnesota office at (763) 420-5087 to schedule a consultation. Or, you can fill out the contact form on this page and a member of our team will contact you to schedule your consultation.

If you are not yet ready to schedule a consultation, but would like additional information, we have two resources for you:

Save My Home Photo Click Here to sign up for our online masterclass where I reveal strategies for protecting your home and life savings from long-term care and nursing home costs.


Save Our Home GuideClick Here to download my guide, "Save Our Home How to Protect Your Home and Life Savings From Long Term Care and Nursing Home Costs"







Chuck Roulet
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Nationally Recognized Estate Planning Attorney, Author, and Speaker