A Medicaid asset protection trust is an important estate planning tool that can help Medicaid applicants qualify for Medicaid and help protect assets from Medicaid estate recovery. The trust is irrevocable and should be created in advance because, for assets to be excluded from Medicaid’s asset calculation, the grantor cannot retain control over the assets placed in trust and must avoid Medicaid’s five-year look-back period. This article explains how a Medicaid asset protection trust works, the potential disadvantages of creating one, and how they can help with Medicaid eligibility and preventing estate recovery, so that you and your family can decide whether a MAPT is the right choice for you.
What Is a Medicaid Asset Protection Trust, and How Does It Work in New York?
A Medicaid asset protection trust is an irrevocable trust that is designed to protect an individual’s assets while helping them qualify for Medicaid long-term care benefits. This is because assets that are put into an irrevocable trust are considered legally owned by the trust rather than by the individual. This then allows the assets in the trust to bypass the asset and income limits for Medicaid eligibility.
In New York, the 2026 asset limits for Medicaid eligibility are:
- $33,038 for a single applicant
- $44,796 for a married couple where both spouses are applying
- $33,038 for an applicant spouse and $162,660 for a non-applicant spouse if only one spouse is applying
The monthly income limits for applicants are
- $1,836/month for a single applicant
- $2,489/month for a married couple where both spouses are applying
- $1,836/month for the applicant spouse if only one spouse is applying
Different types of assets are considered differently in Medicaid asset calculation, as some assets are countable while others are not countable assets. Assets that are counted in Medicaid asset calculations include:
- Cash
- Bank accounts (checking and savings accounts)
- Vacation homes
- Investments
- Stocks and bonds
- Certificates of deposit
Meanwhile, assets that are not counted in Medicaid’s asset calculation include:
- Primary residences (within the home equity limit of $1,130,000 as of 2026)
- Prepaid funeral arrangements
- IRAs or 401(k)s in payout status
- Personal belongings
- Household furnishings
How Does the Five-Year Medicaid Lookback Affect a Medicaid Asset Protection Trust?
Medicaid’s five-year lookback period makes it important to create a Medicaid Asset Protection Trust (MAPT) well in advance for individuals who may need long-term care in the future but do not yet qualify for Medicaid. The lookback period refers to the 60 months before an individual applies for Medicaid long-term care benefits and applies only for nursing home Medicaid. During this period of time, New York will review all transfers and gifts made by the applicant. Any transfer of assets that is considered a gift or is made for less than fair market value may result in a penalty period. Generally, the greater the value of the disqualifying transfer, the longer the penalty period.
During the Medicaid penalty period, Medicaid will not pay for an individual’s long-term care, leaving the individual and their family to bear the significant financial and emotional burden. For this reason, avoiding the penalty period is one of the most important goals of effective Medicaid planning.
One of the most effective ways of avoiding a penalty period is by establishing a Medicaid asset protection trust before the five-year lookback period begins. Assets transferred into a MAPT during the lookback period remain subject to Medicaid’s transfer rules and may still trigger a penalty period. However, because a MAPT is irrevocable, assets that have been held in the trust for more than five years are generally not considered available resources when determining Medicaid eligibility.
For individuals who wish to qualify for Medicaid while avoiding the penalty period, establishing a Medicaid asset protection trust well in advance can be a useful and effective planning strategy. To determine if a MAPT would be the best course of action for you, consider consulting an experienced Medicaid planning attorney to discuss the risk of not having lifesaving care when needed.
What Is Medicaid Estate Recovery and How Do MAPTs Help Prevent It?
Medicaid estate recovery is the mandatory federal program that requires state Medicaid programs, including Medicaid in New York, to recover the costs of certain Medicaid benefits on behalf of the Medicaid enrollee. In New York, estate recovery generally applies after the death of individuals who received Medicaid benefits at age 55 or older or those who were permanently institutionalized, regardless of age. There are certain exceptions to Medicaid estate recovery, as the state cannot recover expenses from
- Enrollees survived by a spouse
- Enrollees survived by a child under 21 years of age
- Enrollees survived by a blind or disabled child of any age
In most other circumstances, unless an exception or undue hardship applies, the state can put a lien on the individual’s house and seek reimbursement for the cost of recoverable Medicaid benefits.
This, however, can be prevented with a Medicaid asset protection trust. Because a MAPT is an irrevocable trust, assets that are properly transferred into it are generally no longer considered owned by the Medicaid applicant. As a result, those assets are typically not included in the recipient’s probate estate or subject to Medicaid estate recovery after death. To ensure that these protections apply, however, the trust must be properly drafted and funded, and any transfers to the trust should generally be made at least five years before applying for Medicaid to avoid a penalty period under Medicaid’s 5-year lookback rule.
What Are the Disadvantages of Having a Medicaid Asset Protection Trust?
The disadvantages of a Medicaid asset protection trust are its strict timing and lesser control over assets compared to a revocable trust. Since a Medicaid asset protection trust is an irrevocable trust, the grantor cannot revoke the trust once it is created, and assets transferred into the trust will no longer be under the grantor’s control. Instead, the appointed trustee will be responsible for managing and distributing the assets according to the trust’s terms. This lack of flexibility can be a disadvantage for individuals who wish to retain the ability to modify the trust or access assets in the event of unpredictable circumstances arising.
Additionally, for a Medicaid asset protection trust (MAPT) to function as intended, the trust must be established well in advance of applying for long-term care benefits. Due to Medicaid’s 5-year look-back period, assets transferred into a MAPT five years before applying for long term care benefits can still result in a penalty period. This means that individuals who wish to use a Medicaid asset protection trust to qualify for Medicaid are required to plan at least 5 years ahead of time if they don’t want their transfers to incur a penalty period.
Frequently Asked Questions
Does a Medicaid asset protection trust protect me against creditors?
Yes, your Medicaid asset protection trust can protect you against creditors because it is an irrevocable trust, meaning that you no longer own the assets transferred into the trust. As a result, those assets are generally more difficult for creditors to reach. However, the extent of this protection depends on the state’s laws and your specific circumstances.
Can I still live in or sell my home if I put it in a Medicaid asset protection trust?
Yes, it is possible for you to continue living in your home, even after transferring it to a Medicaid asset protection trust. As the grantor of a MAPT, you can typically retain the right to live in the home, even though the trust, rather than you, owns the property. Additionally, it is possible to set up the trust so that your trustee has the authority to sell the home on behalf of the trust. However, when the home is sold, the proceeds remain in the trust rather than being distributed directly to you. Your trustee can then use those proceeds to purchase a new primary residence for you in the name of the trust.
Can I be the trustee of my Medicaid asset protection trust?
No, you generally should not be the trustee of your own Medicaid Asset Protection Trust. For a MAPT to function as intended, you must give up control of the assets placed in the trust. If you serve as the trustee, you may retain too much control over those assets, and Medicaid could determine that they are still available to you when evaluating your Medicaid eligibility. This could undermine the primary purpose of establishing a MAPT.
Instead, it is typically best if you appoint a qualified and trustworthy individual to serve as your trustee. Doing so helps ensure that the trust assets are managed responsibly while preserving the asset protection and Medicaid planning benefits the trust is designed to provide.
What assets should I not put in my Medicaid asset protection trust?
Assets that you should typically not put into a Medicaid asset protection trust include retirement accounts like Roth IRAs and 401(k)s, cash for daily living expenses and everyday vehicles.
Is it possible to generate income with my Medicaid asset protection trust?
Yes, it is possible to generate income with a Medicaid Asset Protection Trust. It is common for individuals to transfer income-producing assets, such as stocks, bonds, dividend-paying investments, or rental properties, into a MAPT. These assets can generate income through dividends, interest, or rental payments. However, it has to be noted that income generated from your Medicaid asset protection trust can be taxed and can impact your Medicaid eligibility. This is because additional income that your MAPT generates is generally calculated in your Medicaid income limit. Therefore, it is extremely important to ensure that the income generated does not cause you to exceed the applicable Medicaid income limit, as doing so could jeopardize your Medicaid eligibility.
What documents do I need to create a Medicaid Asset Protection Trust?
The documents typically needed to create a Medicaid Asset Protection Trust include the trust agreement, personal and family information, estate planning documents, and a detailed inventory of assets. After the trust is established, it is important to properly fund the trust by transferring the intended assets into it.
What happens to my Medicaid asset protection trust after I die?
After you die the assets in your Medicaid asset protection trust are distributed to your beneficiaries according to the terms of your trust. Your trustee will also notify your beneficiaries.
About the author
Inna Fershteyn, Esq.
Principal Attorney · Estate planning, elder care & Medicaid planning
- J.D., Benjamin N. Cardozo School of Law — cum laude, Order of the Coif
- B.M., New York University — magna cum laude
- 28+ years in practice · Licensed in New York and New Jersey
- 2026 NY Metro Super Lawyers · NY State Certified Mediator
Inna has practiced estate planning and elder law for over 28 years, focusing on elder planning, Medicaid planning, asset protection, and trust and estate planning for families across Brooklyn, New York and the NJ area. She leads the Law Office of Inna Fershteyn and Associates, P.C., and speaks English, Russian, and Ukrainian.