A few years ago, a woman came into our office with worry written all over her face. Her husband’s health was beginning to decline, and she couldn’t stop thinking about what would happen if he needed nursing home care. They had worked hard their entire lives, saved carefully, and even paid off their home. But she had just watched a neighbor lose nearly everything to long-term care expenses, and she feared her family might face the same fate.
Her concern was valid. Long-term care is one of the biggest financial risks retirees face. Depending on the type of care and your location, costs typically range from $50,000 to $100,000 per year. With the average stay lasting two to five years, those expenses can quickly drain a lifetime of savings.
Studies indicate that approximately 70% of people will require some form of long-term care during retirement. The question isn’t whether care will be needed, but how families can afford it without sacrificing everything they hoped to leave behind.
How Medicaid Works
Medicaid can provide help with long-term care, but it comes with significant restrictions. Before you qualify, you’re required to spend down almost all of your assets. Yes, you’ll get care, but you may have little left to pass on to your spouse or children.
This is where a Medicaid Asset Protection Trust, or MAPT, can make a difference. By transferring certain assets into this kind of trust, those assets are no longer counted when Medicaid reviews your eligibility. That means you can still qualify for care while protecting your home and savings for your family.
How a Medicaid Asset Protection Trust Works
Timing is everything with a MAPT. Medicaid has a look-back period, so assets need to be transferred into the trust well before care is needed. The trust must also be irrevocable, which means once assets are placed in the trust, you can’t use them the same way you did before.
That can sound intimidating, but with the right structure, you can still benefit from those assets in limited ways while protecting them for your heirs. MAPTs are especially useful for non-retirement assets like real estate or investments outside of IRAs. Not every family needs this tool, which is why working with an experienced estate planning attorney is so important.
Other Benefits Beyond Medicaid
A MAPT can provide more than just protection from long-term care costs:
- Estate tax planning: Today’s estate tax exemption is high, but it’s set to decrease in the future. A MAPT can reduce potential tax exposure.
- Control over inheritance: Trusts let you decide how and when your heirs receive money. You can provide distributions over time, delay access until a certain age, or even ensure assets stay in the family in the event of divorce.
Is It Worth the Cost?
Creating a Medicaid Asset Protection Trust is an investment. Depending on the complexity, the cost often ranges from $7,000 to $12,000. For many families, the peace of mind and protection it provides far outweigh the upfront expense. The key is making sure it’s the right fit for your circumstances.
Plan Ahead, Protect Your Legacy
The woman who came to see us decided to move forward with a Medicaid Asset Protection Trust. Years later, when her husband did require nursing care, their home and savings were safe. She had peace of mind knowing her children would still receive the inheritance she and her husband had worked so hard to build.
If you’re worried about how long-term care costs could affect your retirement savings and your family’s future, the time to plan is now. At Bellomo & Associates, we’ll help you explore whether a Medicaid Asset Protection Trust is the right solution for your needs.
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