[ Elder Law · MAPT ]
Sheltering the home,
preserving the basis.
[ The Centerpiece ]
An irrevocable trust drafted with both halves in view.
A Medicaid Asset Protection Trust is the centerpiece instrument of elder law in Tennessee. It is the lawful answer to a single, common worry: that long-term care costs will consume the home, and that TennCare estate recovery will take what remains.
Done correctly, the MAPT removes the home from the countable resources, removes it from the probate estate, and, critically, preserves the step-up in basis at death. That last point is what separates the work of an attorney who is also a CPA from the work of one who is not.
[ How it works ]
Title transferred. Use retained.
The home is transferred into an irrevocable trust. The settlor retains the right to live in the home for life, an interest the law respects but the resource calculation does not count, provided the structure and timing are right.
After the five-year lookback period, the home is no longer counted as an available resource for TennCare eligibility. It is also no longer in the settlor's probate estate, which removes it from estate recovery.
[ The basis question ]
Why the CPA matters.
Direct gifts of appreciated real estate to children eliminate the step-up in basis at death. The children inherit the parent's original cost basis and pay capital gains tax when they sell. On a long-held Tennessee home, that tax can be six figures.
A properly drafted MAPT, with the settlor retaining the right to designate the remainder beneficiaries, can preserve the step-up under Internal Revenue Code Section 1014 by ensuring the assets are includible in the settlor's gross estate for tax purposes only.
The drafting required to thread that needle is precise, and the planning is wasted if the trust is structured the wrong way. We draft it the way a CPA would have wished the attorney had drafted it.
[ Tradeoffs ]
What the family gives up.
- Loss of direct control. The home cannot be sold without the trustee's cooperation, and proceeds remain in the trust.
- Income only access. The settlor cannot take principal back. Distributions of income, where the trust permits, are allowed.
- Gift tax considerations. The transfer is a completed gift for asset protection purposes, with reporting requirements.
- Trustee selection matters. Usually an adult child, with the responsibility and the temperament to act in the parent's interest.
[ Alternatives ]
What we use instead, and when.
Outright gift to children.
Loses the step-up. Exposes the home to the children's creditors and divorces. Triggers the lookback. Almost always the wrong answer.
Life estate deed.
Preserves the step-up, simpler than a trust, but creates exposure for the remainderman during the parent's lifetime and limits the parent's flexibility to sell or refinance.
Spend-down.
Works only when the assets are modest enough to disappear in a planned way. For most families, it is not the right answer.
[ The Work ]
How a MAPT engagement runs.
[ Drafting ]
Trust language and IRC §1014.
An irrevocable trust drafted to TennCare standards, with the retained powers required to preserve the step-up in basis at death.
[ Funding ]
Deed and recording.
Tennessee deed prepared, executed, and recorded transferring the home to the trust. Other assets contributed where the plan calls for it.
[ Coordination ]
Tax and trustee.
Gift tax reporting, basis tracking, and ongoing trustee counsel so the document continues to do what it was drafted to do.
[ Pricing ]
Flat-fee for the standard MAPT engagement.
Most MAPT engagements are flat-fee, with the figure determined by the number of properties, the funding scope, and any companion documents. Disclosed in writing before drafting begins.
[ Questions ]
What clients usually ask.
As early as is comfortable. The five-year lookback runs from the funding date forward. Earlier is always better.
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