WWW.LAWYER-MONTHLY.COM | JUN 2022 ELDER LAW - SAMANTHA MCCARTHY 20 that it meets the requirements of both the state and federal rules. What significant laws and regulations should be considered as part of this process? Trusts are subject to a plethora of laws and regulations, including, but certainly not limited to, state and federal laws regarding establishing and administering trusts, IRS rules and regulations regarding taxation of trusts, and state-specific tax laws regarding gifting, estate and inheritance taxes. However, as it relates to Medicaid asset protection trusts, the most important laws and regulations to be considered are those established by the United States Department of Health and Human Services, Centers for Medicare & Medicaid Services, as well as the specific state agency charged with administering and enforcing the Medicaid rules and regulations – which in Rhode Island is the Department of Human Services, Office of Health and Human Services. Because Medicaid is a federal program mandated to the states, which the states can legislate around, both the federal and state laws and regulations must be considered carefully when engaging in Medicaid planning, including establishing and funding MAPTs. Without the appropriate terms and conditions as required by such laws and regulations, a trust could, on its face, seem to provide asset protection, but not actually accomplish such purpose when evaluated by the potential need for future long-term care, the timeline of such need for care, and engage in a thorough discussion related to their goals and objectives for their assets both during their lifetime and upon their passing. Once assets are funded into a Medicaid asset protection trust, they should not be accessed for the benefit of the grantor. Therefore, careful consideration must be given regarding what assets to place into a MAPT and how such assets will be managed both in the near future as well as the long term. Clients must also give careful consideration to the five-year lookback rule imposed by Medicaid. This is a period of time during which any assets that have been transferred for less than fair market value are subject to a penalty imposed by the state Medicaid agency, therefore creating a period of time in which Medicaid coverage is not available and the client/Medicaid applicant must therefore privately pay for long-term care services. Because there is no consideration for the transfer to a trust, these transfers to a MAPT are considered a gift, and are therefore subject to the five-year lookback rule. Accordingly, if clients are uncertain regarding their health or ability to stay out of a nursing home for at least five years after establishing a MAPT, then this type of trust may not be the best option for them. Even if it is determined that a MAPT is not the best fit, there are still last-minute options that can be employed with proper planning and legal advice which will allow clients to save at least a portion of their otherwise available assets and still become qualified for Medicaid services. If a client has determined that establishing a MAPT is in their best interest, then consulting with an experienced and knowledgeable elder law attorney is essential to ensure the trust is appropriately drafted and funded so We often see clients who believe they have irrevocable Medicaid Asset Protection Trusts but, upon review, are missing many key provisions required by the state and federal government.
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