MAPT

John age 74 and Mary his wife age 70 are both retired and they have a will giving their estate to their two children in equal shares. Mary has a stroke and must go into the nursing home. What does Medicaid do to help. They look at incomes and assets. John’s social security is $2,000 and Mary’s is $800. John owned a small business and saved after tax money in the stock market until he retired and then transferred his funds to government bonds paying 3%. He had $400,000 in his account plus a house worth $500,000 with a $25,000 mortgage. They were living on their SS plus $800 interest from their bond account. The house is exempt but the $400,000 saving is divided by two leaving $200,000. Since this is over the MN Community Spouse Asset Allowance (CSAA) of $165,000, John can keep only $165,000 and the remaining $235,000 is exposed to Medicaid. He can use part of the other $235,000 to pay off the $25,000 mortgage on his house. He can use $5,000 to pay off his car loan, $3,000 to pay off credit card debt and $25,000 for prepaid funerals. That leaves $177,000 for the nursing home expenses. Since they had been living on $2,800 from SS and $800 from bond interest Medicaid will allow John to keep both SS checks and together his income would be $3,600. MN law allows Minimum Monthly Maintenance Needs Allowance (MMMNA) of $4,000 max so John may be eligible to purchase an immediate Medicaid annuity for his life expectancy for $400 per month. That would cost about $60,000. This would leave only $107,000 for the nursing home which would be used up in ten months at the average nursing home cost in MN of $10,000 per month. After that Medicaid would continue to pay for Mary’s expenses by placing a lien against the house. Ten months later Mary dies and Medicaid wants their $100,000. The house can be sold to pay this debt and John can move into a senior living apartment or John could get a $100,000 mortgage loan using the house as collateral and remain in his home. Case 2 John age 74 and Mary age 70 are retired and living on social security and interest from savings. They have income of $2,000 and $800 respectively from SS and $800 interest from a bond account. Their home is worth $500,000 with a $25,000 mortgage and $400,000 in bonds. Concerned about nursing home cost they decide to purchase a Medicaid Asset Protection Trust (MAPT). They place their house and their bonds in the trust. They no longer own these assets but they can change the trustee and beneficiary and have access to the interest generated by the bond account. Their income will not change. Mary has a stroke and goes into the nursing home. If the MAPT has been in force for five or more years these assets are not available and Medicaid pays the nursing home cost. Years later when John dies these assets pass onto the named beneficiaries in the MAPT. The most important caveat is the five-year rule.