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Medicaid Asset Protection Trusts (MAPT)

Preserve Savings, Protect The Home, And Keep Options Open For Long‑Term Care—With New Jersey’s Rules In Mind.

Medicaid Asset Protection Trusts (MAPT)

How A Properly Designed, Properly Funded MAPT Works With NJ Medicaid (MLTSS), The Five‑Year Look‑Back, Spousal Protections, And Real‑World Care Decisions.

The cost of long‑term care in New Jersey can overwhelm even careful savers. Families often learn this at the worst time—during a hospital discharge or a rushed nursing‑home admission—when choices are limited and paperwork piles up. A Medicaid Asset Protection Trust (MAPT), designed and funded before a crisis, can lawfully position a home and savings so you can qualify for benefits when needed while preserving dignity for the healthy spouse and stability for the family. Our job is to explain the tradeoffs in plain English, build a MAPT that fits your life, and execute the funding so it actually works.

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What is a MAPT?

A MAPT is an irrevocable trust that holds assets for your benefit and your family’s, under rules that can protect them from being counted for NJ Medicaid long‑term services and supports (MLTSS) after the five‑year look‑back has run. You do not own the trust assets anymore; a trustee you choose controls them under instructions we draft together. In return for giving up certain rights today, you gain a path to care benefits tomorrow without first liquidating everything.

A MAPT is not a magic wand. It doesn’t guarantee eligibility and it doesn’t hide assets. It must be drafted precisely, funded on time, and administered correctly—otherwise Medicaid can unwind it or impose penalties. When done right, it’s a practical way to pay for care without sacrificing a spouse’s security or a lifetime home.

Why Families Choose A Medicaid Asset Protection Trust

The typical New Jersey story is simple: one spouse becomes frail or a parent’s memory slips, private‑pay costs accelerate, and savings shrink faster than anyone expected. Families want care, safety, and choice—without impoverishing the healthy spouse or losing the home to recovery claims later. A MAPT can:

  • Protect The Home: Transfer the residence to the trust and reserve the right to live there for life. Properly drafted as a grantor trust, the home can still qualify for property‑tax benefits where applicable and can receive a step‑up in basis at death, reducing capital gains for heirs.

  • Preserve A Nest Egg: Move a portion of savings to the trust to start the five‑year clock, keeping enough outside for comfortable living and unforeseen needs.

  • Stabilize The Healthy Spouse: Coordinate MAPT transfers with spousal protections (Community Spouse Resource Allowance and income rules) so the spouse at home isn’t pushed to the edge.

  • Control How Help Is Delivered: Use trust funds for supplemental needs, home modifications, private companions, or therapies that improve life beyond the basic Medicaid package.

Constructing a Medicaid Trust

We design most MAPTs as grantor trusts for income‑tax simplicity and basis planning, while keeping them out of your countable resources for Medicaid after the look‑back. You typically keep:

  • The Right To Live In The Home: A recorded occupancy or life‑use right so nothing changes day‑to‑day.

  • Income From Trust Investments (Optional): Some designs let income flow to you but keep principal protected; others retain all income inside the trust—chosen based on your budget and Medicaid rules.

  • A Trusted, Independent Trustee: Often an adult child or professional; you can name successors and we add a trust protector to adjust within guardrails without court.

We avoid rights that would pull assets back into your ownership for Medicaid counting (for example, the unrestricted right to revoke or demand principal). The language matters; we draft with precision and explain every clause.

The Five‑Year Look‑Back (And How We Navigate It)

NJ Medicaid reviews transfers made in the 60 months before an application. Gifts or transfers for less than fair market value during that period can create a penalty period (a block of time when Medicaid won’t pay). Funding a MAPT starts that clock. The earlier we begin, the more choices you keep. If you’re already in a crisis window, we can still improve outcomes—lawful spend‑downs, care contracts, or partial repositioning—but the full benefit of a MAPT comes with time.

Our process includes a clear calendar: what’s transferred, when the clock runs, what remains available for living expenses, and when an application would be viable if care escalates.

Paying For Care During The Look‑Back Period

You’ll still need a plan to pay for care until the five‑year clock completes. We map a bridge budget: private pay, long‑term care insurance, Veterans benefits (if applicable), and carefully drafted caregiver agreements if a child provides care. Where suitable, we coordinate annuities or spend‑downs with your CPA/financial planner. The MAPT is one piece of a larger care‑funding strategy; we make the pieces work together.

Funding—The Step That Makes Or Breaks The Plan

A MAPT that isn’t funded is a binder on a shelf. We prepare NJ‑appropriate deeds (often Bargain & Sale with Covenants), retitle non‑retirement accounts, and align beneficiaries where a trust should receive assets. We do not move IRAs/401(k)s into the trust; instead we coordinate beneficiaries and cash‑flow plans. Every transfer is documented, with confirmations saved to your secure vault. That paper trail is what wins with Medicaid caseworkers.

Common Myths (Let’s Retire Them!)

  • “Medicaid Will Take My House.” Medicaid has estate recovery rights after death, but smart planning—often with a MAPT funded on time—can keep a home available for a spouse and children while meeting care needs.

  • “I’ll Lose All Control.” You’ll give up ownership of protected assets, but we reserve living rights, set the rules, choose the trustee, and add a trust protector. You gain predictability and a path to benefits.

  • “It’s Too Late To Help.” Even in crisis, coordinated legal and financial steps can often salvage value and stabilize care—though the full power of a MAPT needs time.

Tax Treatment (And Why We Coordinate With Your CPA)

  • Income Tax: Grantor‑trust drafting keeps tax reporting on your 1040 while you’re alive; non‑grantor variants can be used for specific goals. We’ll choose deliberately with your CPA.

  • Capital Gains & Basis: With grantor‑trust features and retained use, assets can be includible in your estate for basis purposes, allowing a potential step‑up in basis at death that reduces gains for heirs.

  • Gift/Estate Tax: Funding the MAPT is generally a completed gift; we prepare Form 709 where required and design remainder provisions for fairness among children.

How We Work With Families

We begin with a Care & Cash‑Flow Strategy Session—a detailed conversation about diagnoses, safety, housing, and numbers. We then design the MAPT, draft in plain English, and move assets into position with full documentation. We coordinate alongside your CPA/financial planner and, as needed, elder‑care managers. Through AMP (Annual Maintenance) or CCP (Continuing Counsel Plan), we keep funding current, refresh confirmations, and update the plan as health and laws change.

Important New Jersey Specifics

  • MLTSS Practices vary By County: We track local documentation habits and prepare applications with the bank records, deeds, and explanations caseworkers expect.

  • Spousal Protections: We time transfers alongside spousal resource and income rules so the healthy spouse remains stable; we model income shifts after placement.

  • Facility Contracts: We scrutinize admissions paperwork to limit personal guarantees and avoid clauses that conflict with Medicaid timing.

  • Deed Recording Lead Times: Shore‑county recordings can back up in season; we calendar recordings and follow through.

  • Inheritance Tax Awareness: NJ inheritance tax can surprise families leaving assets to non‑Class A heirs; we design distributions with this in mind.

Frequently Asked Questions (FAQs)

Will I Still Be Able To Live In My Home?
Yes. We reserve occupancy rights so nothing changes day‑to‑day, while the deed and trust protect the property for the long term.

Can I Sell The Home If It’s In The MAPT?
Yes—through the trustee. Proceeds stay protected in the trust and can be used for a replacement residence the trust owns (we’ll address tax and homestead details in advance).

What Happens If I Need Care Before Five Years?
We’ll pivot to crisis strategies—lawful spend‑downs, care contracts, partial repositioning—and model the penalty period so you can choose the least painful route.

Does A MAPT Affect My Taxes?
We aim for grantor‑trust treatment for ease of reporting and potential basis step‑up. We’ll coordinate filings (including Form 709 if gifts require reporting) with your CPA.

Is This Only For The Very Wealthy?
No. Middle‑class families and healthy spouses often benefit most. The point is not to avoid paying for care—it’s to keep a roof over a spouse’s head and preserve reasonable savings while qualifying for help.

If you want care choices tomorrow without sacrificing everything today, a MAPT may be the right move—especially before a crisis. We’ll show you exactly how it works in your numbers and timeline, then build and fund it so it’s ready when you need Book A Strategy Call to get started!
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