Medicaid Asset Protection Trusts
Medicaid Asset Protection Trust (MAPT) is probably the most effective tool for protecting the home, but did you know the Medicaid Trust can protect more than just the house?
Medicaid Trusts can also hold cash assets, and as long as they’re in the trust for five years, those assets cannot be the basis for disqualification. The donor of the trust has the right to the income generated by the assets at all times.
If you open an account at a brokerage firm or bank for the Medicaid Trust, and the money put in earns interest, dividends, or otherwise increases in value, the donor is entitled to that income. Also, the Medicaid Trust can own a rental property, and that rental income is still payable to the donor. However, it can get tricky because the donor does not have the same access to the principal, which is the term for the original amount that was placed into the trust.
There could be an emergency where the cash assets in the Medicaid Trust can be removed by the beneficiaries and gifted by the beneficiaries back to the donor. But again, only in emergencies. It would be best to only place cash into this Medicaid Trust that the donor is not expecting to take back out, other than the income earned on it.
With the use of the Medicaid Trust and a carefully written estate plan, an individual can properly position themselves and their assets to qualify for government benefits, yet still retain their home and other assets to pass on to their children or other beneficiaries.
The downside to a Medicaid Trust for some people is that the creator of the Medicaid Trust cannot be the trustee, so the donor has to name someone else to be a trustee. That brings about the worry where one could be afraid of losing control of their cash or property because they’re not the trustee. However, this only impacts the distributions from the Medicaid Trust, not how the assets are invested or used.
The donor does retain the right to change and replace the trustee at any time because the donor controls who the trustee is so they can maintain control over the Medicaid Trust. If the trustee is against what the donor wants, the donor can easily replace the trustee. That is how the donor keeps control.