Planning for Long Term Care: Medicaid Look-Backs, Gifting, and MAPTs

Planning for long-term care is an extremely important step to take to protect both yourself and your family. The reality is that nursing homes, assisted living, and in-home care can be extremely expensive, and without proper planning, these costs can quickly drain your savings.

With careful planning, you can preserve your assets and still qualify for Medicaid. Planning strategies include understanding the Medicaid look-back period, gifting, and considering an Medicaid Asset Protection Trust (MAPT).

What is Medicaid?

Medicaid is designed to help individuals with very limited resources and income get the essential medical services they need via government settlements. Medicaid is funded by both the federal and state governments, and each state runs its own program while maintaining federal guidelines.

Medicaid look-backs:

Medicaid look-backs are a required part of applying for Medicaid long-term care benefits. The “look-back” period refers to the review process used to examine a person’s financial history when they apply to long term care services.

In most states, including New York State, the review usually goes back to 60 months (5 years) from the application date. The purpose of the look-back period is to prevent applicants from transferring assets solely in order to qualify for the long-term care benefits.

The state uses this period to check whether there has been any transfer of assets for less than fair market value during the 60 month period. If any transfers are found, then Medicaid imposes a penalty period that delays the applicant’s eligibility for benefits. The length of the delay depends on the value of transferred assets.

Gifting:

When considering the Medicaid look-back period one may become concerned about gifting assets to friends or family members within the look-back period. While gifts made outside of the 60 month period typically do not impact eligibility, gifting during the look-back period can trigger penalties and delay Medicaid eligibility.

There are ways to structure gifts so that theycomply with Medicaid rules. For example options may include gifting assets gradually, or placing gifts into trusts.

Medicaid Asset Protection Trust (MAPT)

A Medicaid Asset Protection Trust (MAPT) is an irrevocable trust (a permanent transfer of asset control) that allows you to protect certain assets from being used when applying for Medicaid; and to designate a trustee who will gain legal control of the assets.

As a MAPT is a permanent transfer of ownership and control, those assets are no longer considered part of your estate. The finality of the transfer is why such assets are no longer counted towards Medicaid’s asset and transfer calculation.

The most effective long-term care plans are proactive. By gaining a better understanding of Medicaid, Medicaid look-backs, the rules around gifting, and MAPTs you can protect yourself, your family, and your assets.