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Medicaid Asset Protection Trusts

Aug. 30, 2022

If you or your spouse eventually need long-term care, your income and assets will be used to determine whether you qualify under Medicaid, since Medicare, which is available to anyone who turns 65, covers only health care. Nursing home or in-home care services are not covered by Medicare, but by Medicaid.

To receive long-term care under Medicaid, you will have to qualify in terms of assets and income. Assets allowed for an individual reach their threshold at $2,000. For a couple both seeking Medicaid, the limit is $3,000, but some exemptions are allowed in computing your assets. Your primary home, home furnishings, personal belongings, your vehicle, and irrevocable burial trusts are excluded.

The income thresholds depend on which Medicaid program you’re applying for – Nursing Home Medicaid or Supplemental Security Income (SSI), for example. Your assets are probably going to pose the biggest challenge since Medicaid expects you to “spend down” – dispose of assets – to reach the limit required, but the spend down has to occur well before you apply for Medicaid.

If you plan ahead, there is a way to protect your assets and still qualify for Medicaid by establishing a Medicaid Asset Protection Trust (MAPT). This will allow you to retain your assets and even pass them along to your heirs without Medicaid making a claim on your assets to pay for your long-term care.

What Is a Medicaid Asset Protection Trust (MAPT)?

In broad terms, there are two types of trusts available for those involved in estate planning. A revocable trust is one in which you can place your assets and manage them yourself until you become incapacitated or pass away, in which case the trustee you name in the document will take over managing your financial affairs. A revocable trust means that it can be amended or revoked at any time.

In contrast, an irrevocable trust is a legal arrangement in which you assign your assets to a trustee, and you no longer have any control over them. An irrevocable trust is like a diamond – it’s forever. It cannot be changed or revoked.

In both types, you can name beneficiaries just as in a will. An irrevocable trust is often used to avoid tax consequences and to limit the exposure of your assets to creditors and lawsuits. An MAPT is another form of an irrevocable trust. Medicaid must be sure that you can’t access your assets while receiving long-term care before it will allow this route around asset limitations.

How Do MAPTs Work?

Your MAPT will be administered by a third-party trustee. You will not be allowed, by yourself, to sell off or transfer assets, though as mentioned, you can name beneficiaries and the trustee will have to honor your designations. If you have investments in your MAPT that earn you income, you may qualify under Medicaid to receive them, but you must be sure that this income does not surpass Medicaid limitations.

A Medicaid Asset Protection Trust is thus not just a simple form you can download online, fill out, and feel safe and secure should you eventually need the help of Medicaid long-term care. Depending on your assets and any income generated by them, you’re going to need a thorough review by an experienced attorney to complete the MAPT qualification process.

The whole purpose of an MAPT is to shield your assets from seizure by Medicaid to pay for your long-term care. While an MAPT is irrevocable, the terms you set up in the document will help ensure that your loved ones are taken care of just as a will or living (revocable) trust would.

Some MAPT Hurdles

An MAPT must be set up well in advance of your need for Medicaid services. Medicaid has a look-back period of five years. In other words, when you apply for Medicaid, the system administrators will search to see whether you disposed of assets during those five years. Those assets can be counted toward the $2,000 or $3,000 threshold.

This means that your MAPT needs to be established at least five years before you need long-term care under Medicaid. It is not an instant fix.

How an Attorney Can Help

You should consider an MAPT when beginning the estate planning process or when you periodically review your estate documents. Click here to Schedule a FREE Virtual Estate Planning Session. You don’t want to suddenly face the prospect of needing long-term care and you haven’t prepared for the possibility. We will guide you through the entire process and help you understand what needs to be done to ensure your loved ones are taken care of.


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