Executive Summary: Medicaid Protection Plan for Person A

Prepared for Trustee | March 2026

The Optimal Plan in One Paragraph

In the current demo baseline, the strongest path is still the trust-based protection structure. The legacy condo is sold up front to create clean liquidity, the primary house is placed into the MAPT, the protected condo sits inside the SNT, and yearly withdrawals are managed to preserve stability as care costs rise. At the Medicaid transition, the remaining exposed retirement assets are moved into the SNT before application. The result is a cleaner estate structure, lower exposure to recovery pressure, and a materially stronger end state than the unprotected alternatives.

Three Trust Types, Plain English

1. The Existing Irrevocable Trust (Current State)

This trust already exists and holds the legacy condo. Its original purpose was to protect assets from outside creditors. Under this plan, and with beneficiary consent, the attorney petitions the court to restructure it into the MAPT (under Oregon's ORS 130.200). All beneficiaries consent, the judge approves, and the trust is upgraded — same assets, better terms. The legacy condo stays in trust throughout and never enters an individual beneficiary's personal name. This has to happen before the proceeds from the sale of the legacy condo can become available. An attorney will be able to advise whether the sale can proceed before or only after this restructuring happens.

2. MAPT -- Medicaid Asset Protection Trust (Holds the House)

Holds Person A's primary residence
Two trust type options — pending legal advice and modeling:
- Grantor trust -- all income, property taxes, and deductions appear on Person A's personal 1040. Simpler, but post-Medicaid roommate income would be seized as patient pay
- Non-grantor trust -- trust files its own Form 1041. Roommate income stays in trust post-Medicaid (protected from seizure), but Person A loses property tax and mortgage interest deductions. The attorney will advise which structure is optimal
The Limited Power of Appointment (LPOA) is what preserves the stepped-up basis at death while still keeping the trust assets structurally separated from probate recovery exposure. The benefit is qualitative and substantial: heirs inherit a much cleaner sale position than they would under direct ownership
Assets in the MAPT are outside probate, so Oregon's Medicaid estate recovery program cannot claw them back after death (see ORS 416.350 — verify life estate termination language with attorney)
The 5-year lookback clock starts when assets enter the MAPT

3. SNT -- Special Needs Trust (Holds C2's Condo + Cash)

Holds C2's condo and a cash reserve for maintenance, taxes, and insurance
Third-party SNT -- because the money comes from Person A (not C2), there is no Medicaid payback when C2 eventually passes
C2 does not legally "own" anything in the trust, so SSA cannot count it as a resource against their SSDI or future SSI eligibility (see POMS SI 01120.203)
C1 (you) controls all distributions as trustee

Why the Demo Favors an Upfront Sale

The current demo state treats the upfront sale as the cleaner baseline because it converts a second property into deployable capital immediately and removes long-horizon landlord complexity from the trustee workload. That keeps the trust structure easier to reason about and makes the comparison between exposed and protected paths easier to see in the app.

How the Sale Proceeds Fit the Structure

In the demo logic, the legacy condo sale produces the capital that makes the protected structure possible. The proceeds support the SNT housing move, seed trust balances, and reduce the need for more fragile or debt-heavy transitions later.

Why the Protected Condo Is Lightly Levered

The current demo favors a high-equity protected condo purchase because lower debt drag means fewer forced IRA withdrawals, lower tax friction, and less pressure on both trusts during the high-care years. In the app, that choice is one of the main differences between a structure that merely delays problems and a structure that actually survives them.

C1's Role as Trustee

The plan designates a single trustee for both the MAPT and the SNT. Key responsibilities:

MAPT: Pay property taxes, insurance, and maintenance from MAPT funds; file annual trust tax return (informational only since it is a grantor trust); maintain the property in habitable condition
SNT: Pay C2's condo expenses (mortgage, taxes, HOA, insurance, maintenance) from SNT funds; manage IRA withdrawals into the SNT; keep records of all distributions; never distribute cash directly to C2 (pay vendors and bills on their behalf)
Medicaid transition: When Person A qualifies, liquidate remaining IRA into SNT; coordinate with elder law attorney on application; ensure MAPT lookback period has elapsed
After death: Sell the house (stepped-up basis, no capital gains); distribute MAPT proceeds per trust terms; continue managing SNT for C2's lifetime
Advantage of a single trustee: A single trustee sees the full financial picture across both trusts and can coordinate cross-trust transfers, equity tracking, and Medicaid timing without negotiation or delay. The alternative — separate trustees — risks conflicting decisions at the worst possible moment, when the IRA liquidation, SNT funding, and Medicaid application must execute in exact sequence.

Time Commitment

As soon as possible: Consult an elder law attorney. The court process for trust restructuring takes time, and every month of delay compresses the margin for completing C2's SNT condo purchase before the school year.
Now through setup: Moderate -- working with attorney on trust formation, selling the legacy condo, purchasing the SNT condo, transferring the primary house (bridge refi if court slips past summer)
Steady state: Light -- paying bills quarterly, annual tax filings, maintaining records
Medicaid transition: Heavy for 2-3 months -- IRA liquidation, application, facility coordination
After settlement: Maintenance -- managing SNT for C2

Compensation

A trustee fee of $2,900/year is reasonable and modest for managing two trusts under ORS 130.080. You may choose to waive it.

What BurnRate Shows You

BurnRate is a long-range financial projection tool that lets you adjust assumptions -- housing value, leverage, withdrawal timing, optimizer use, and care timing -- and immediately see how each decision affects trust solvency, tax burden, and inheritance equity. See the companion quick-start guide for how to use it.

For detailed analysis, see the companion reports in this folder.