(recordonline.com) The rules and misconceptions of the irrevocable Medicaid Asset Protection Trust (MAPT) are many. If you do not have long-term care insurance, the next best protection from nursing home costs is the MAPT that protects assets in the trust from nursing home costs after the assets have been in the trust for five years. Following is what you may and may not do with the amazing MAPT.
Although the MAPT is an irrevocable trust, you may revoke irrevocable trusts in New York if all the parties, usually the parents and adult children, consent in writing. You may also amend the MAPT, such as changing beneficiaries.
Unlike a revocable trust, which does not protect assets from nursing home costs, you and your spouse may not be the trustees. Although the trustee is usually one or two adult children, you are still in control because you may substitute current trustees with new trustees.
After you transfer assets to the MAPT, you may take all income, such as interest and dividends, on at least a quarterly basis. If you have rental property in the trust, the renters still pay the rent checks to you, not the trust. However, you may not spend the principal in the trust. If you cannot spend the principal, the nursing home cannot get the principal, so the “income only rule” is a powerful protection from nursing home costs, which range between $12,000 and $18,000 per month.
Even though you may not spend the principal in the trust, you may use trust principal to pay for real estate taxes, home maintenance and repairs, and home insurance on real estate in the MAPT. You may also make gifts from the trust principal in any amount to children, but they may not give you the gifted money.
You may sell your house in the MAPT. You may use the money from the sale, which stays in a bank account in the trust, to buy a new house, without starting a new five-year penalty period. You retain your real estate tax exemptions for the primary residence. You also keep your capital gains tax exclusion when you sell your residence, which is $250,000 per person and $500,000 per married couple.
You may not use trust principal to pay for personal bills, telephone or utility bills, or to buy a vehicle. You may not take capital gains from trust assets.
You may save money from nursing home costs even if the assets have not been in the MAPT for five years. For single applicants for Medicaid in a nursing home you may save about half of the assets headed to the nursing home with the “gift and loan strategy.” For married couples, when one spouse applies for Medicaid in a nursing home, the spouse at home may keep the house and between $74,820 and $126,420 in other assets. If the couple owns more assets than allowed, we have the New York law of “spousal refusal” that allows the spouse at home to keep the extra assets and “refuse” to pay the nursing home.
