Written by Attorney Michael Burgett of Burgett Law Firm, PLLC of Waco, TX
Who Should Consider Using A Medicaid Protection Trust?
In Part One of this series the focus was on describing what a Medicaid Protection Trust is and what it can accomplish. It also discussed the significant advantages associated with using a Medicaid Protection Trust over making a direct transfer to your beneficiaries while you’re living. Part Two of this series addressed several of the significant tax benefits that can arise through the use of a Medicaid Protection Trust. This final segment will explore for whom the use of a Medicaid Protection Trust is often most appropriate.
The first and most obvious group of people who should consider a Medicaid Protection Trust (“MPT”) is the elderly. I’ll leave it up to the reader to decide exactly how to define “the elderly”, but for MPT purposes it generally means age seventy and older. This demographic is young enough to appreciate the disastrous consequences of not planning for long-term care, yet old enough to see that the future is not that far down the road.
Another group of people who should consider the use of an MPT is the spouse or child of a chronically ill person. In these situations, the value of the assets and the length of time before anticipated institutionalization will dictate the feasibility of using the trust. Those family members can understand the implications of what is going to happen if they do not divest some or all of their assets. If there are enough assets, only a fraction of the assets will be lost if nursing home placement can be delayed for a few years.
Veterans can do VA preplanning which usually requires the transfer of nearly all the person’s assets in order to qualify for Improved Pension benefits. The MPT is frequently used to qualify for these benefits three years after establishment and funding while also obtaining Medicaid benefits after five years.
Finally, the children of aging parents who are not chronically ill should discuss the use of an MPT with their parents so they’re aware of their options and can work with a professional to preserve their legacy of financial wealth. Children should also share with their parents the risks of vulnerability and exploitation that may be faced as they age. An MPT can shield them from the nefarious schemes of others who may attempt to cheat them out of their assets.
Whether and when to use an MPT comes down to personal goals. If passing on assets to your family, a charity, or other individuals is important to you, minimizing the risk of losing everything to nursing home care should be a high priority, and using an MPT may be the perfect solution. It is worth keeping in mind that an MPT is not an “all or nothing” proposition. Clients can transfer substantial assets to an MPT yet still retain resources for needs which may arise over the next several years.
There are few certainties in life, though one thing we can almost always count on is that changes will occur. From a legislative point of view, the MPT is still a very viable option. However, laws are changing constantly. Recently several major law changes were made which eliminated some key estate planning opportunities. While I am not aware of anything currently pending which would take the MPT off the table as a planning option, there is no guarantee that the opportunity to take advantage of its benefits will be available for planners indefinitely. Establishing an MPT now could preserve a lifetime of hard work and savings.
Thank you for following this series. If you found it interesting, or if you would like any additional information about this or other estate planning topics, please feel free to reach out to us by sending a message on social media, by email at Sara@BurgettLawFirm.com, by phone at (254) 218-6288, or by visiting our website at BurgettLawFirm.com.
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- Part 3: Who Should Consider Using A Medicaid Protection Trust? - September 1, 2019