December 2, 2023

A Medicaid trust in Florida, also called a Medicaid Asset Protection Trust (MAPT), can help a Medicaid applicant qualify for Medicaid coverage for nursing home care while preserving assets to pass to heirs. This type of irrevocable trust allows you to shelter assets so you can become eligible for Medicaid without first spending down your savings.

Understanding how Medicaid trusts work in Florida can help you make informed decisions about Medicaid planning strategies and long-term care medicaid.

Understanding Medicaid and the Medicaid Trust

Medicaid is a federal program designed to assist low-income individuals and families with medical costs. It covers many services, including nursing home care and other long-term care services. However, qualifying for Medicaid can be challenging due to strict income and asset limitations.

This is where a Medicaid Trust comes in. It’s a specific type of trust designed to help individuals qualify for Medicaid while protecting their assets. The trust assets are not counted towards Medicaid eligibility, allowing individuals to meet the program’s stringent financial requirements. However, it’s essential to understand that this involves giving up some control over the assets placed in the trust.

What is a Medicaid Asset Protection Trust (MAPT)?

A Medicaid Asset Protection Trust (MAPT) is an irrevocable trust created to protect your assets from Medicaid’s estate recovery efforts. When properly established, assets transferred to a MAPT are safe from Medicaid and can’t be counted for Medicaid eligibility.

Unlike a revocable living trust, once assets are placed in an irrevocable trust like MAPT, they cannot be removed or altered without the consent of the trustee and the beneficiaries of the trust. This level of protection can be particularly beneficial for assets like your home and other properties.

What Assets Can Be Placed in a Medicaid Trust?

The Medicaid rules restrict what assets can be transferred to a Medicaid trust to avoid penalties. Typically, the following assets can be safely placed in a Medicaid trust in Florida:

  • Cash accounts like checking, savings, CDs, and money markets
  • Non-retirement investment accounts
  • Vehicles, jewelry, art, collectibles
  • Real estate besides your primary residence
  • Rental property and vacation homes
  • Business interests
  • Life insurance with cash value

These assets are placed in the irrevocable Medicaid trust, so they are not counted for Medicaid eligibility purposes. This allows you to qualify for Medicaid coverage without first spending down these assets.

An Irrevocable Trust Offers Powerful Benefits for Medicaid Applicants in Florida

Also referred to as a Medicaid Asset Protection Trust (MAPT), an irrevocable trust can be an invaluable tool for Florida residents aiming to qualify for Medicaid. Here are some key advantages:

Protects Assets from Medicaid Spend-Down Rules

To qualify for Medicaid in Florida, you can only have $2,000 in countable assets in your name. Without a Medicaid trust, you’d have to spend down your assets until you reached the $2,000 limit before Medicaid would start paying for your nursing home care.

A Medicaid trust allows you to shelter excess assets so they are not counted against the Medicaid eligibility limits. This prevents you from having to deplete your savings to qualify for assistance.

Avoids Medicaid Estate Recovery

After your death, the state Medicaid agency has the right to seek reimbursement for nursing home costs paid through Medicaid. This is known as Medicaid estate recovery.

Assets placed in an irrevocable Medicaid trust are exempt from Medicaid estate recovery claims in Florida. This ensures your assets can pass to your beneficiaries instead of repaying the state after you die.

Retains Control Over Assets

Because a Medicaid trust is an irrevocable trust, you must give up legal ownership of assets transferred into the trust. However, the terms of the trust allow you to retain control over the assets and determine who can benefit from the trust.

This allows you to still control what happens with the assets in the trust while also making those assets unavailable for Medicaid eligibility purposes.

Preserves Assets for Heirs

Medicaid trusts allow you to preserve assets to pass on to your loved ones after your death. Without asset protection planning, your estate could be depleted by spending down assets for Medicaid eligibility and Medicaid estate recovery claims.

Transferring assets to a Medicaid trust ensures you can leave an inheritance for your family and ensures your wishes for distributing your estate are carried out.

Medicaid Eligibility and the Impact of Asset Protection

Medicaid eligibility is determined based on an applicant’s income and assets. Certain assets, like your primary home and vehicle, are typically excluded from this calculation. However, other assets can make a Medicaid applicant ineligible for benefits.

With a MAPT, you can transfer assets to the trust, reducing your countable assets and helping you qualify for Medicaid long-term care. It’s important to note that Medicaid imposes a look-back period to prevent last-minute transfer of assets. Any assets transferred within this period may result in a penalty period of Medicaid ineligibility.

How Medicaid Trusts Work in Florida

Medicaid trusts must be carefully drafted to comply with regulations in Florida. Here is how they work:

  • Irrevocable trust: The trust must be irrevocable, meaning you can’t take the assets back or unwind the trust. The assets are permanently transferred out of your name.
  • Trustee management: You name a trustee to manage the assets in the trust on your behalf. This gives you continued control while the assets are technically owned by the trust.
  • Income distributions: The trust is structured to distribute all income generated from assets to the Medicaid recipient. This aligns with Medicaid rules requiring income to be counted for eligibility.
  • Discretionary principal distributions: The trustee can make discretionary principal distributions to the beneficiary or beneficiaries. However, the trustee has sole control over these distributions.
  • Remainder beneficiaries: After the Medicaid recipient’s death, the remaining trust assets pass to the named remainder beneficiaries, such as children or grandchildren.
  • Longer look-back period: Florida has a 60-month look-back period, meaning transfers made 60 months before applying for Medicaid may still be penalized. Timely planning is essential.

How Can You Protect Assets By Establishing a Medicaid Trust?

Establishing a Medicaid trust allows you to protect your assets from being counted toward Medicaid eligibility. However, this process involves giving up some control over the assets. The trust would be managed by a trustee, typically an adult child or trusted individual, who has the discretion to manage the trust assets according to the terms of the trust.

It’s crucial to work with a competent elder law attorney in your area when creating an irrevocable trust. They can guide you through the process and ensure that the trust is designed correctly to meet Medicaid’s requirements.

Can a Revocable Living Trust Be Used for Medicaid Planning in Florida?

Revocable living trusts by themselves do not achieve Medicaid asset protection in Florida. This is because the assets in a revocable trust are still deemed available and countable for Medicaid eligibility purposes.

To use a living trust for Medicaid planning, it must be converted to an irrevocable trust. A special needs or Medicaid trust provision is included when drafting the irrevocable trust. This properly restricts access to the assets for Medicaid purposes.

Both revocable and irrevocable trusts have benefits in estate planning. However, only an irrevocable Medicaid trust offers asset protection for Medicaid eligibility.

Consult an Elder Law Attorney About Using a Medicaid Trust in Florida

The intricate rules around Medicaid irrevocable trusts demand legal expertise. Mistakes can easily render a trust ineffective and leave assets exposed. Relying on a trusted Florida Medicaid planning attorney provides confidence and peace of mind.

At Elder Needs Law in Aventura, our dedicated Medicaid asset protection team offers personalized guidance based on your unique circumstances. We take pride in demystifying the planning process and helping families protect what matters most. Contact us today to discuss your needs in a free consultation. With the right strategy, you can gain Medicaid’s help with long-term care costs without exhausting your life savings.

Frequently Asked Questions:

Q: Can I still benefit from my assets if they are in a Medicaid trust?

A: While the assets may no longer be considered yours for Medicaid purposes, you can still benefit from them indirectly. For example, the trust can provide you with income generated by the assets or allow you to live in a home that is owned by the trust.

Q: What happens if I need Medicaid before transferring my assets to a trust?

A: If you need Medicaid assistance before transferring your assets to a trust, you may be required to spend down your assets in order to become eligible. Once your assets have been spent down, you can then create a Medicaid trust to protect any remaining assets.

Q: Can I transfer any type of asset to a Medicaid trust?

A: While many types of assets can be transferred to a Medicaid trust, there may be limitations or restrictions depending on your specific situation and the rules of your state’s Medicaid program. It is important to consult with an attorney to determine what assets can be transferred to the trust in your individual case.