Reliable Disability & Estate Planning

Through Every Age & Stage of Life

The Benefits of the Asset Preservation Trust

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What Are The Benefits of the Asset Preservation Trust?

Modern medicine gives us the ability to live longer.  And, as we age, most of us feel scared about whether we will be able to take of ourselves.  If we cannot, further questions arise, “who will take care of me and how will I pay for the care”?  A payor source for these care services is Medicaid, and in Connecticut, Medicaid will pay for this care at home. 

I am still astounded at how many folks believe one needs to be “broke” to receive Medicaid benefits.  This is false!  While it is true that Medicaid has strict income and asset limits as well as rules which punish an applicant who has gifted assets.  Guided plans are used to obtain eligibility for Medicaid, and to preserve savings, retirement funds, and even inheritance for your loved ones.  One tool we use often is the Asset Preservation Trust.  But we must tread cautiously.    

To begin, let’s understand the term “gifting”. Gifting is good to reduce estate taxes.  This is commonly known as the ability to gift $15,000.00 to a person in a year.  However, gifting in this manner or otherwise, and then applying for Medicaid to cover costs of long-term care is dangerous.  Medicaid rules are quite specific regarding gifts.  If you gift assets within 5 years of applying for Medicaid, your eligibility will be jeopardized. 

The important lesson is simple.  Don’t “gift” blindly; get legal guidance before gifting! 

Through a detailed plan, specific assets are gifted into an asset protection trust.   When this is done in advance, the passage of time (5 years) allows you to qualify for Medicaid benefits while preserving assets for your beneficiaries.  

The trust acts as a “bucket” for you to transfer real estate and financial investments to your Trustee.  The Trustee holds the property in the bucket, providing creditor protection and safeguarding assets for your beneficiaries.  You are not the beneficiary or the Trustee of this Trust, but you chose the Trustee and the beneficiaries.  

When assets are transferred to the Trust, Medicaid rules consider it a gift.  However, a state’s “look-back” period cannot exceed 60 months from the Medicaid application date.  At month 61, the initial gifts transferred to the Trust are now protected, and Medicaid eligibility can be obtained.  If something should happen and the plan is disrupted, the trust can be “unfunded” and different strategies could be implemented for you to qualify for Medicaid.  

The planning team at Disability Planning Partners has saved millions of dollars through the use of asset preservation trusts.  We encourage you to get guidance as you age, and always before gifting.  This guidance may very well save your assets from long term care expenses.