Celebrating 10 years! 2007-2017

Medicaid Asset Protection Trusts (MAPT) (Elder estate protection)

Anyone here familiar with them? I have relatives here in NYC associatex03/03/17
you need someone familiar with the STAR exemption. dingbat03/03/17
I checked the NY website for the STAR exemption but it addre associatex03/03/17
if the MAPT is a grantor trust and doesn't get its own EIN, dingbat03/03/17
Depends on the assessing unit and how they view it. In some retard03/08/17
There are less complicated ways of protecting the residence greenhorn03/03/17
in my experience, life estates are rarely good. What happen dingbat03/04/17
I agree dingbat, an irrevocable trust that focuses on asset greenhorn03/04/17
Thanks Greenie! Wow, youre still here! How is life? I will t associatex03/05/17
Also, depending on the state, if there is joint tenancy of t qdllc03/06/17
yes, it can. ignoring the spousal exclusion, medicaid can m dingbat03/06/17
Ehmm..that doesn't sound quite right (Medicaid forcing a sal associatex03/06/17
ok, let me start by clarifying that medicaid doesn't make yo dingbat03/06/17
That sounds more accurate - I agree that the Medicaid rules associatex03/06/17
a trust is not a life estate. A life estate is a partia dingbat03/06/17
p.s. sorry for not being more accurate earlier. generally h dingbat03/06/17
Didn't the time to file STAR pass on 3/1? retard03/08/17
Nope. enhanced STAR deadline is March 15th. I just mailed it associatex03/08/17
Dingbat is spot on with what he says. He obviously knows his greenhorn03/06/17
associatex (Mar 3, 2017 - 2:09 pm)

Anyone here familiar with them? I have relatives here in NYC who want to open one of these but was told they would lose their STAR exemption/senior citizen discount status once they transfer their primary home into the trust.

anyone know if this is true?

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dingbat (Mar 3, 2017 - 2:26 pm)

you need someone familiar with the STAR exemption.

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associatex (Mar 3, 2017 - 3:46 pm)

I checked the NY website for the STAR exemption but it addresses beneficiaries who live w. them in the primary home..it doesnt discuss trustees or whether a beneficiary who lives elsewhere can allow them to claim the exemption. I also need to know what other tax implications there may be for a MAPT (other than obviously declaring the income of the trust on taxes).

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dingbat (Mar 3, 2017 - 4:12 pm)

if the MAPT is a grantor trust and doesn't get its own EIN, then everything is reported on the grantor's tax return as if the trust doesn't exist. i.e. no tax implication

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retard (Mar 8, 2017 - 5:14 pm)

Depends on the assessing unit and how they view it. In some municipalities as long as the beneficiary resides in the dwelling STAR and the right to participate in SCAR proceedings remain. In others? Idk maybe not so much.

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greenhorn (Mar 3, 2017 - 9:10 pm)

There are less complicated ways of protecting the residence of an elderly person. You don't need a trust necessarily. The same protection can be accomplished by transferring the property to the ultimate beneficiary (your husband) but making sure the elderly retain a life estate in the property.

Of course the remaining life estate can be subject to Medicaid, but a transfer to a child with a retained life estate is quite effective. Not only does it preserve any senior property tax exemptions/credits, but it also allows for a step up in taxable basis on the property.

To answer your question, placing the residence into an irrevocable trust will not cause a loss of any senior exemptions or property tax credits.

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dingbat (Mar 4, 2017 - 7:37 am)

in my experience, life estates are rarely good.
What happens if the remainderman predeceases? or if there's an issue with the remainderman? The remainderman can lose their interest in a lawsuit, divorce, etc. Once a life estate is set up, it can't be changed, whereas a well-crafted trust allows the grantor to retain some control.

As for the step up in basis, you get that through a trust as well.

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greenhorn (Mar 4, 2017 - 12:09 pm)

I agree dingbat, an irrevocable trust that focuses on asset protection is often the ideal option. I was just pointing out that sometimes a deeded interest with retained life estate will suffice. Of course, every situation is different and there are plenty of times that an irrevocable trust is the only option. Especially if your remaindermen are of questionable character/intellect.

The trust needs to be carefully worded, otherwise it can cause some serious problems down the road. The government is ruthless in collecting taxes and attacking assets !

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associatex (Mar 5, 2017 - 1:03 am)

Thanks Greenie! Wow, youre still here! How is life? I will talk to these relatives about this trust..I just wanted to make sure they wouldnt be losng their STAR exemption.

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qdllc (Mar 6, 2017 - 7:42 am)

Also, depending on the state, if there is joint tenancy of the property, can Medicaid attach when the party isn't the sole owner of the property? I know this usually depends on how joint tenancies are viewed under state law.

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dingbat (Mar 6, 2017 - 10:25 am)

yes, it can.
ignoring the spousal exclusion, medicaid can make you sell your interest in the property. As a matter of fact, medicaid can make you sell your interest in a life estate as well. The extent to which they will do these kind of things varies from county to county, but, if it's in your name, they can make you sell it

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associatex (Mar 6, 2017 - 4:18 pm)

Ehmm..that doesn't sound quite right (Medicaid forcing a sale).

My mother in law was on Medicaid (went into a nursing home, passed away a few months later peacefully). She had significant assets and she had not prepared any type of trust or estate planning, so Medicaid basically put a lien on her primary home. Medicaid doesn't force you to divest yourself of property, per se, they usually do not count the Primary Residence as a property you have to sell, they simply put a a lien on it and then collect on it when the property is sold - whether its transferred to an heir or sold to any outside party.

In essence, we are going through this now w/ her home. It recently went into contract and Medicaid will advise us of the lien amount and that lien gets satisfied from the proceeds of the sale.

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dingbat (Mar 6, 2017 - 4:35 pm)

ok, let me start by clarifying that medicaid doesn't make you sell your assets, just that you don't qualify while you have assets.
It's also worth noting that Medicaid is state-run, and states can impose lower requirements.

There are some exceptions, but generally you can't have more than $2,000 in countable assets.
Countable assets generally exclude $119k for the spouse, a vehicle, personal possessions and prepaid funeral plans.
The principal residence may or may not be a countable asset, depending on whether a spouse remains in the home, the applicant intends or is likely to return to the home, and possibly the value of the home. The rules differ from state to state.

As for whether medicaid can or will include a partial interest such as a life estate, this varies by state, and also by county. Some administrators may not be aware of such matters or know how to deal with them. Where I live, a life estate is not counted, whereas if you drive 5 minutes east, the next county over will require that you at least attempt in good faith to sell the life estate.

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associatex (Mar 6, 2017 - 4:57 pm)

That sounds more accurate - I agree that the Medicaid rules vary from state to state. I know in NY, when we talked w the Medicaid people for my MIL, we were told she could would have to "spend down" the cash in her savings/checking accounts until they reached $ 6,000 so that she would qualify.

In NY, technically Medicaid doesn't really "reject" anyone. They will just impose a penalty/waiting period (its 5 or 6 years and called a "look back" period) for when benefits will start to be paid out. That means if my mom decided to gift me a $5K check for my birthday and if she has to apply for Medicaid in 2 years, that $ 5K check has to be returned to her and/or they will make her wait an extra 5-25 months for her to start receiving Medicaid benefits. The rules are pretty specific and so many exclusions - as you said, the primary home may or may not be viewed as a countable asset in an estate.

I have no idea how Life Estates work - I am trying to file for Enhanced STAR right now for my relatives and the application asks about this, I am checking the "No" box but I am not sure if they consider a MAPT trust a life estate (my gut says no because a trust grantor has more freedom in designating more than 1 trustee, vs a life estate being stuck to just 1 remainderman) (??). I've no idea, I don't practice elder law so am hoping someone here can educate me a little more.

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dingbat (Mar 6, 2017 - 5:56 pm)

a trust is not a life estate.

A life estate is a partial interest in property, splitting the current interest from the future interest. There are valuation tables available, which can guide you as to the value of the life estate vs the value of the remainder (but good luck selling a life estate)

A trust is legally a "person", like a corporation is legally a "person". Placing the assets in a trust means giving up your own interest just as if you'd given them away.

The lookback is generally 5 years. What that means is that assets that you gave away within the past 5 years may be included in your assets for purposes of calculating medicaid eligibility. That means that if today you have $5k in assets, but last week you gave away $100k, medicaid deems you to be worth $105k. If, as you said, NY medicaid allows up to $6k in assets, Medicaid will require you to spend $99k of your own money before medicaid benefits kick in. They don't care if you no longer have the money, so you'll need to get it back somehow.

Note that not all assets placed in a trust are countable for 100% of their value during the entire lookback period. Without going into any detail whatsoever, let's say you place $1,000,000 into a medicaid trust. 2 years later, Medicaid may only require you to spend down $200,000 before benefits kick in.
again, the details here vary from state to state, and also from asset to asset.

I'd be happy to help, as I'm quite familiar with medicaid trusts. However, I am not knowledgeable about the STAR program. I know attorneys in NY who specialize in this who I could connect you with, but they'll charge you a moderate fee for it (they charge me a fee too)

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dingbat (Mar 6, 2017 - 5:58 pm)

p.s. sorry for not being more accurate earlier. generally here people tend to ask general questions, so I provide general answers. Usually a one or two line answer suffices, so there's no need for a multi-paragraph answer.

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retard (Mar 8, 2017 - 5:12 pm)

Didn't the time to file STAR pass on 3/1?

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associatex (Mar 8, 2017 - 8:30 pm)

Nope. enhanced STAR deadline is March 15th. I just mailed it earlier today.

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greenhorn (Mar 6, 2017 - 11:58 pm)

Dingbat is spot on with what he says. He obviously knows his stuff.

To get to the point, in NY (Nassau/Suffolk) if you place the property into an irrevocable trust (Medicaid trust), it will not lose its property tax exemptions.

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