The general cost of having a Medicaid Asset Protection Trust lies anywhere between $3,000 and $10,000, which is dependent on the complexity of the trust and the attorney fees.
General discussion
Long-term care can become very expensive, and most people use Medicaid to partly support these expensive costs. In order to be eligible for Medicaid, a person needs to have limited income. To protect one's wealth from having to be spent on long-term care and still be Medicaid eligible, many people create a Medicaid Asset Protection Trust. This is a legal tool which allows one to transfer his or her property from personal ownership to the created trust and become Medicaid-eligible, according to the very strict Asset Requirements test applied by Medicaid.
But what are the costs to establish a Medicaid Asset Protection Trust? Sorry to be vague, but it really depends on a number of variables, which could include the complexity of your financial situation itself, the attorney you hire, and the particular type of trust. In this article, we will parse how much it costs to establish a MAPT, what drives the cost, and if it makes sense as an investment in your long-term financial plan.
What Is a Medicaid Asset Protection Trust?
A Medicaid Asset Protection Trust (MAPT) is a type of irrevocable trust wherein irrevocable means you give up control over your assets. The MAPT not only protects your assets from the Medicaid determination, but also provides protection from creditors, lawsuits, and probate. The minute you place an asset in the trust, you don't own the asset any longer. The trust owns the asset.
The MAPT is important because it will help shield your wealth toward Medicaid's asset limits. As an irrevocable trust, however, once you've transferred your assets into the MAPT, recovering them or changing the terms isn't likely to be easy.
Why Does a Medicaid Asset Protection Trust Matter?
A MAPT can become an integral part of your long-term care planning. Following are the 5 reasons why without a Medicaid Asset Protection Trust you'll be compelled to spend down all your assets for Medicaid, which will in fact leave nothing for your loved ones. It will help you protect your wealth for your loved ones, while also being eligible for Medicaid benefits when you need them, using a Medicaid Asset Protection Trust. Several factors may determine the cost of establishing a Medicaid Asset Protection Trust. Understanding those factors may be helpful in making an informed decision as to if a MAPT is right for you and what to expect in the area of fees.
Attorney's Fees
What Are Attorney's Fees? The lawyer's fee is the most significant cost of creating a MAPT. All those fees pay in general for the time and expertise of the attorney drafting your trust, and all legal advice encompassed within. In terms of Price? Attorney fees range from a low of a few hundred
dollars to thousands of dollars depending on the experience of the attorney, geographical location, and complexity of the individual's situation. Normally, the more experienced attorneys in the larger metropolitan areas charge the most. Another factor is that, if your financial condition is complex and time-consuming to set up the trust, then it will be expensive.
Common Costs: An attorney can charge anywhere from $3,000 to $10,000 to prepare a MAPT. Needless to say, a basic trust at the lower end of that price range would be sufficient in not complex financial situations, and a trust with many moving parts is simply going to cost more.
Complexity of Your Financial Situation
What Does Complexity Mean? The level of complexity of your financial situation will be determined by the number and type of assets you own, sources of income, and overall financial picture. The higher the level of complexity is, the more trust details and personalization will have to be. In What Way Does It Impact the Price? If you have multiple assets, like a number of properties, businesses, or investments, it will require additional planning and work in setting up the MAPT. Added complexity may mean additional expenses when creating the trust, as the attorney is making sure that the assets are properly transferred into, and provided protection under, the trust.
Usual Fees: While those with a very basic financial situation might pay in the lower end of the range—say $3,000 to $5,000—for a drafted MAPT, those with more complexity around their finances will have cost estimates that are significantly higher—$7,000 to $10,000 or more.
Geographic Location
Why Does Location Matter? Thus, it also depends on the location of your residence, where one may expect variation in the cost of legal services. Still, it is usually the fact that in metropolitan areas or large cities, compared to rural areas or smaller towns, the general trend is higher the legal fees. How It Affects the Cost? If you reside in a major metropolitan area, or region where the cost of living is relatively high, you should expect to pay more to legal providers for their services in the creation of the MAPT. If you reside in a less costly region, the fee may be more modest.
Average Costs: In a high-cost area, such as New York or Los Angeles, formation of a MAPT could run $8,000 to $10,000 or more. The cost if one lives in a small town or other rural community would be $3,000 to $5,000.
The Experience and Expertise of the Attorney
Why is Experience Important? A very experienced attorney in the field of elder law and Medicaid planning will definitely cost more than a lawyer who is not. However, expertise may be highly important to ensure that your trust is going to be legally put in place. How Does It Impact the Cost? More involved, the cost of an attorney specializing in Medicaid planning and elder law will increase
to a great length while creating a MAPT. This additional cost may be worth having peace of mind that the trust is appropriate and effective in its goal: protecting your assets.
Typical Costs: The more experienced solicitors may cost between $7,000 and $10,000, or perhaps even higher, especially if your situation is complicated. The less experienced solicitors will charge less, but you are taking the risk of the trust not being set up adequately.
Disbursements and Fees
What Are Disbursements? In addition to attorney fees, a few other costs might well be involved in creating a MAPT, such as filing fees, the fees required for shifting assets into the trust, and other incidental continuous administrative expenses. How Do They Affect the Cost? These additional fees accumulate, especially when you have many assets which must be transferred into the trust. Although not as significant as the attorney fees, they are still important and should be taken into consideration in your total budgeting for a MAPT.
Average Costs: The other costs can range from hundreds of dollars to several thousand, depending on the complexity of the trust involved and how many assets are to be transferred.
Is a Medicaid Asset Protection Trust Worth the Cost?
Why It Might Be Worth It While the upfront cost of a Medicaid Asset Protection Trust is high, more often than not it is well worth it if you have big tickets on the line that you would like to protect. Major benefits of a MAPT include:
Protecting Your Assets: A MAPT protects your hard-earned wealth from Medicaid's asset limits and ensures that you will be able to pass your savings and property down to your heirs without depleting your resources.
Qualifying for Medicaid: Moving your assets into a MAPT means you own fewer countable assets and may thereby qualify for Medicaid benefits in caring for high-cost, long-term care.
Peace of Mind: Be rest assured that your assets are safe and that you have undertaken a measure for planning your future. This can provide peace of mind to you and your loved ones.
When It Might Not Be Worth It In some cases, a Medicaid Asset Protection Trust may not be the best option. For example:
● You don't have enough assets: If your assets are already within Medicaid's limits, or if you have very few assets, the expense of setting up a MAPT may not make sense.
● You're in poor health: If you need Medicaid benefits right away, the look-back period may make a MAPT ineffective. Other strategies would be more appropriate in that case.
● If You're Not Ready to Give Up Control: The MAPT is irrevocable, and after the assets are transferred to the trust, you cannot make a new decision about the property. If you are uncomfortable with losing control of your assets, then perhaps an MAPT is not for you.
Be sure to make a well-thought-out decision to set up a Medicaid Asset Protection Trust based on your financial situation, your health outlook, and your long-term goals. The following steps will help you in making the decision.
Assess Your Financial Situation
Check your assets, income and financial goals. MAPT may be appropriate for you if you have substantial assets in the first place that you are concerned about protecting. However, if your assets are already in Medicaid's limits, other strategies may better suit you.
Consider Your Health and Timing
If you are in good health and do not want to use Medicaid in the immediate future, consider establishing a MAPT—it's planning ahead and will work around the look-back period. If, on the other hand, you need Medicaid in the near future, you may have to exercise some other options.
Meet with an Expert
However, Medicaid planning is very complex, so you should consider engaging an elder law attorney or a financial planner who specializes in Medicaid planning. They will be able to help you understand your available options and approximate the costs in order for you to decide if a MAPT is right for your situation. A MAPT could be a wise investment in your future if its benefits outweigh the costs.
FAQs: How Much Will A Medicaid Asset Protection Trust Cost?
1. What is the average cost of a Medicaid Asset Protection Trust? This will generally cost anywhere from $3,000 to $10,000. This is because the exact amount for any specific case depends on the complexity of your financial situation, the attorney's experience, and where you live.
2. Are there any ongoing costs with a Medicaid Asset Protection Trust? Yes, there may be ongoing administrative costs, which would include fees for managing the trust or filing necessary paperwork. The typical going cost usually is much lower than the initial fee.
3. Is it possible to establish a Medicaid Asset Protection Trust without an attorney? Yes, you absolutely can create a trust on your own, but an attorney recommends it since the regulations that concern Medicaid are complex. It may very well be that a mistake in the trust that, say, renders it invalid—would prove to be even costlier than the attorney fee to begin with.
4. What if I cannot afford to establish a Medicaid Asset Protection Trust? If the cost is prohibitive, then other Medicaid planning strategies, like spend-downs or Medicaid-compliant annuities, should be considered. An elder law attorney can help you explore these options.
5. Is the cost of a Medicaid Asset Protection Trust tax-deductible? Legal fees associated with estate planning may, in some cases, be tax-deductible. Consult with a tax professional to understand how this applies in your situation.
Conclusion
Perhaps the most significant way in which you could protect your assets and assure Medicaid eligibility when the need arises is to create a Medicaid Asset Protection Trust. Yes, a MAPT could be costly, but in most instances, the benefits of having your wealth protected and being able to pass on to your family greatly outweigh that cost.
Key to unleashing the true power of the MAPT: advance planning, the right attorney, and, above all, due consideration of a person's financial situation and goals, through which a person can create a trust that answers one's needs and gives peace of mind in regard to the protection of one's assets.
You will be in a better position to decide if you are just a novice in your Medicaid planning thoughts or being driven finally to set up a MAPT. With this planning, you can work through the minefield that Medicaid is and secure your financial legacy.
