How Does a Medicaid Asset Protection Trust Work?

How Does a Medicaid Asset Protection Trust Work?- Long-term care can cost up to five figures per month in many states and requires advance planning to preserve assets. Many people turn to an estate planning attorney to create a plan, as explained in a recent article from Newsday, “Medicaid Asset Protection Trusts can help Long Islanders keep their home and pay for care.”

A Medicaid Asset Protection Trust, or MAPT, is an irrevocable trust designed to help people who fall into the middle ground of having a home and some assets, but not enough to self-pay for long-term care without losing a lifetime of savings.

The asset threshold for both community or home care and nursing home care is $33,038 for a single person and up to $44,796 for a couple. This is a limit easily surpassed simply by owning a home. After a five-year lookback period, a MAPT may help avoid selling their home to pay for long-term care.

The US Department of Health and Human Services says someone turning 65 in 2026 has a 70% chance of needing long-term care at some point during their lifetime. Even if a person is receiving care at home, it can easily run from $5,000 to $8,000 monthly.

The MAPT allows a person to continue to live in their home and, unlike a typical irrevocable trust, preserves tax benefits. It can also shield assets from Medicaid estate recovery claims, often referred to as “clawbacks.” Under the Medicaid Estate Recovery Program, states are required to seek reimbursement from a deceased Medicaid recipient’s estate. The state is only permitted to recover assets passing through probate, assets held solely in a person’s name and not in accounts with a designated beneficiary.

How Does a Medicaid Asset Protection Trust Work?

People put more than their home into a MAPT. They place savings and investment accounts into these trusts as well.

Retirement accounts, like 401(k)s and IRAs, don’t belong in a trust. Doing so could trigger income taxes and isn’t necessary, as those accounts are considered exempt for Medicaid purposes.

When the estate is transferred into the MAPT, a new deed naming the trust as the owner of the home will be needed, and it will need to be recorded with the county clerk. If a bank account is moving into the trust, you may need to visit the branch in person to complete trust transfer forms.

MAPTs are complex. Even if your home is in the MAPT, you can still live there and receive investment income. If you want to sell a home in a MAPT, the trustee will need to handle the transaction. Proceeds from the sale can go back into the MAPT or be used to buy another home.

MAPT properties retain property exemptions, like those for seniors and veterans, as well as capital gains exclusions. Upon the death of the owner, a MAPT typically preserves the step-up basis so that heirs will pay less tax on inheritance.

Another good reason for a MAPT: trust assets avoid probate, going directly to heirs.

Talk with an estate planning attorney about whether a MAPT is right for you. Once assets are in the trust, they are not easily taken out, and mismanaging funds can mean a loss of protection for Medicaid. An estate planning attorney will review your entire situation to determine whether a MAPT is right for you and for your family.

Schedule your phone consultation: THE LAW OFFICES OF CLAUDE S. SMITH, III

How Does a Medicaid Asset Protection Trust Work?

Reference: Newsday (July 8, 2026) “Medicaid Asset Protection Trusts can help Long Islanders keep their home and pay for care”