Asset Protection Elder Law Planning Case Study
Bill and Jane Johnson had one overriding goal in mind for their planning: ASSET PROTECTION. Their charge to us was to make sure that they and their adult daughter were the only persons who could ever benefit from or have access to their life savings. They also wanted the option to use Medicaid to help defray the high cost of long-term care.
The Johnsons’ assets consisted of the following:
| Asset Description | Net Value |
|---|---|
| Home / primary residence | $ 300,000 |
| Rental real estate | 850,000 |
| Vacant land | 385,000 |
| Cash | 30,000 |
| Life insurance and annuities | 730,000 |
| Business interests | 240,000 |
| Furniture, furnishings, and tangible personal property | 45,000 |
| Motor vehicles | 50,000 |
| TOTAL VALUES | $ 2,630,000 |
The Johnsons’ Asset Protection Plan
Revocable Living Trust (RLT)
This trust was designed to hold the assets that are exempt from being taken in a lawsuit and exempt (not counted as resources) on applications for Medicaid. This trust holds:
(a) The Johnsons’ residence
(b) The contents of their home
(c) Their motor vehicles
(d) A bank account
Medicaid Asset Protection Trust (MAPT)
To the MAPT the Johnsons transferred assets that were at risk to lawsuits and which would have counted against them for Medicaid qualification, including:
(a) The vacant land
(b) The parties’ rental real estate
(c) A series LLC we formed on their behalf, with each series owning a separate parcel of real estate
(d) A bank account
(e) Rights to money owed to the Johnsons
From day one, the assets in the MAPT were protected against lawsuits and from other predators. More than five years have now passed since the Johnsons transferred the last of their assets to the Medicaid Asset Protection Trust. As such, under Medicaid rules the assets in their MAPT are now exempt even from the government. They are not countable resources should either of the Johnsons need long-term nursing care.
The Johnsons will always be the beneficiaries of all income from their MAPT, while their daughter will be the principal beneficiary of both trusts.
The Johnsons’ invested a total of about a month and a half in a nursing home ($8,500) and, in the process, sheltered all $2.6 million in assets.
“I would write a check for $8,500 everyday if you could assure me that in five years it would be worth over $2.5 million.” (Commenting on their asset protection plan )
KATHY JOHNSON, CLIEnt
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