Table of ContentsView AllTable of ContentsMedicaid and Nursing Home CareLook-Back PeriodRevocable vs. IrrevocableMedicaid Asset Protection TrustIrrevocable Trust BenefitsAlternatives
Table of ContentsView All
View All
Table of Contents
Medicaid and Nursing Home Care
Look-Back Period
Revocable vs. Irrevocable
Medicaid Asset Protection Trust
Irrevocable Trust Benefits
Alternatives
Medicaid Asset Protection Trusts (MAPTs) are irrevocable trusts that protect a Medicaid applicant’s assets from being counted for eligibility purposes. MAPTs enable people who would otherwise be ineligible for Medicaid to receive Medicaid coverage for the custodial long-term care they need, either at home or in a nursing home.
It’s important to be aware of the Medicaid look-back period: The government looks to see if you had any assets that were gifted, transferred, given away, placed in a MAPT, or sold for less than their fair market value over a specific timeframe. In most states, the look-back period is five years, but there are a couple of exceptions.
Benefits of creating a MAPT include protecting assets while still qualifying for Medicaid, with the assets in the MAPT not included in the estate for the calculation of Medicaid recovery, estate tax, or probate. Some of the cons of a MAPT include not being the trustee; the advanced timing required to create a MAPT (five years, in most states); and potential effects on quality and choice of care.
Jupiterimages / Getty Images
How Medicaid Pays for Nursing Home Care
Long-term care in a nursing home can be expensive. In 2024, the average cost for a semi-private room was $8,641 per month, increasing to $9,872 per month for a private room.
When you consider the average Social Security payout is about $1,900 per month, this leaves seniors struggling to afford the care they need.Obviously some retirees have other sources of income in addition to Social Security, but the cost of long-term care can be a big lift for all but the wealthiest.
But to qualify for Medicaid if you’re 65 or older, there are both income and asset limits. That means an older person will generally need to exhaust their assets (and also have a low income) to qualify for Medicaid coverage.
For people who are under age 65,Medicaid eligibility is based on your income(an ACA-specific version of MAGI). But if you’re 65 or older, Medicaid eligibility also depends on your assets/resources. In 2024, in most states, you must have $2,000 or less in total countable assets and earn less than $2,829 per month in income to qualify.
Countable Assets
Countable assets include:
Non-Countable Assets
These assets are not counted:
Keep in mind that any payouts you receive from a 401K or IRA or income you receive from a rental property will affect your Medicaid eligibility. They will count towards your income limit.
If you have too many assets, you may need to spend some of them down before you can be eligible for nursing home care.
What assets should not be in a trust?Discuss your circumstances with a tax advisor who specializes in elder law and asset management. Be aware that transferring retirement accounts (401ks and IRAs) into a MAPT will likely count as a withdrawal from those accounts, which has tax implications.
What assets should not be in a trust?
Discuss your circumstances with a tax advisor who specializes in elder law and asset management. Be aware that transferring retirement accounts (401ks and IRAs) into a MAPT will likely count as a withdrawal from those accounts, which has tax implications.
The Medicaid Look-Back Period
Since many people want to preserve their assets for their spouse, children, or future generations, Medicaid planning becomes very important.
Some people will try to give their assets away or transfer them to friends and family, but that could pose its own problems. That is where theMedicaid look-back periodcomes into play.
If any assets were gifted, transferred, etc. during the look-back period (generally the five years before the person applies for Medicaid), Medicaid can impose a penalty period during which eligibility for Medicaid will be delayed, even if the person’s current financial circumstances would otherwise make them eligible for Medicaid. So the general rule of thumb is that you have to sort out any sort of Medicaid planning asset management at least five years before you end up needing Medicaid to cover the cost of long-term care.
The more money that changed hands, the longer the waiting period. It could take months or years to become eligible for Medicaid nursing home coverage. This can be troublesome for anyone needing custodial care in the near future.
Revocable vs. Irrevocable Trusts
The strategy is to turn your countable assets into non-countable assets. Some people look to trusts as a way to accomplish this goal. Unfortunately, not all trusts are created equally. You need to understand the difference between a revocable and an irrevocable trust.
With a revocable trust, you still have access to your assets and retain control to change or cancel provisions of the trust. Medicaid will see this kind of trust as a countable asset.
An irrevocable trust, on the other hand, is one where someone else, a designated trustee, takes the reins. You cannot touch the assets or amend provisions for the trust in any way.
The trustee is not required to distribute any assets to you, even for the purposes of health care. The day your assets are transferred into an irrevocable trust, they become non-countable for Medicaid purposes.
Unfortunately, those assets are seen as a gift and are subject to the Medicaid look-back period. After five years (in states other than New York and California), transferred assets will no longer subject you to penalties or delayed eligibility for Medicaid’s long-term care benefits.
Planning in advance, before you need nursing home care, provides the most advantages.
How to Set Up a Medicaid Asset Protection Trust
It is recommended that an attorney set up the MAPT because it must be set up correctly to ensure the assets transferred into the trust are exempt from Medicaid’s asset limit.
Pros and Cons
There are advantages and disadvantages to using an irrevocable trust as part of your Medicaid plan.
Beyond converting your countable assets to non-countable assets, there are other benefits to having an irrevocable trust that relate to estate planning.
Upon your death, Medicaid reserves the right to recover funds paid on your behalf. They can go after your remaining assets, even assets that were not initially countable, like your house.
An irrevocable trust can protect your assets againstMedicaid estate recovery.Assets in an irrevocable trust are not owned in your name, and therefore, are not part of the probated estate.
When you or your spouse (if they are part of the trust) pass away, any assets put into an irrevocable trust are not included in the estate for the calculation of Medicaid recovery, estate tax, or probate.
One of the downsides of a MAPT is it can be a risky venture. As much as you believe the person you assign as a trustee will manage the assets in your best interests, there is nothing to stop that person from spending down the funds for their own gain. You need to be confident about your decision because you will not have legal recourse in the event that occurs.
Other potential downsides to creating a MAPT include:
Timing:In most states, the MAPT needs to be created at least five years before needing long-term care to avoid the Medicaid look-back period or you may still be responsible for some or all of your long-term care costs. For those looking to establish Medicaid long-term care eligibility in the short term, the look-back period is a major obstacle.
Costs:Legal fees to set up and implement a MAPT can be costly because it is a complex process requiring many hours of work. The cost varies significantly from a low of $2,000 to a high of $12,000, but it could save a lot of money in the long run given the cost of nursing home care.
Effects on Care:Medicaid does not cover all care facilities, so relying on Medicaid could affect the choice and quality of care a person receives. Nursing homes that don’t accept Medicaid tend to be more expensive, although they may also provide a higher quality living experience. To live in one of these facilities, you’ll either need to pay in cash, or have a private long-term care insurance policy that covers the cost.
Alternatives to a Medicaid Asset Protection Trust
In addition to MAPTs, other planning strategies can lower countable assets. Some options include:
Regardless of the option you’re considering, it’s recommended that you speak with an attorney who specializes in elder law and Medicaid estate planning.
Summary
Medicaid planning can be very complicated. Setting up an irrevocable trust like the MAPT is an option, but there are many factors to consider before doing so.
Transferring your assets into a trust can make them non-countable for Medicaid eligibility, although they could be subject to the Medicaid look-back period if the trust is set up within five years of your Medicaid application.
Due to the pros and cons, as well as the complexity involved in creating a MAPT, it may be in your best interest to discuss these and other Medicaid planning options with an elder law attorney in your state.
Medicare Part D Donut Hole
10 SourcesVerywell Health uses only high-quality sources, including peer-reviewed studies, to support the facts within our articles. Read oureditorial processto learn more about how we fact-check and keep our content accurate, reliable, and trustworthy.American Council on Aging.Understand Medicaid’s Look-Back Period; Penalties, Exceptions & State Variances. January 26, 2024Hoyt, Jeff. Senior Living.Nursing Home Costs in 2024. February 5, 2024.Backman, Maurie. The Motley Fool.Here’s the Average Annual Social Security Benefit in 2024 – and Why It May Not Be Enough for You. January 7, 2024.Chidambaram, Priya and Burns, Alice. KFF.A Look at Nursing Facility Characteristics Between 2015 and 2023. January 5, 2024.American Council on Aging.Medicaid Eligibility: Income, Asset & Care Requirements for Nursing Homes & Long-Term Care.ECR Planning.Do Retirement Savings (IRAs, 401Ks, Pensions) Count Against Medicaid Long Term Care Eligibility? Accessed February 2024.Krause, Dale, JD, LLM. American Bar Association.Practical Information for Lawyers: IRAs: The Problem Asset Related to Medicaid. September 20, 2022.American Council on Aging.How Medicaid planning trusts protect assets and homes from estate recovery.American Council on Aging.Understand Medicaid’s look-back period; penalties, exceptions & state variances.American Council on Aging.Medicaid estate recovery programs: when Medicaid can and cannot take one’s home.
10 Sources
Verywell Health uses only high-quality sources, including peer-reviewed studies, to support the facts within our articles. Read oureditorial processto learn more about how we fact-check and keep our content accurate, reliable, and trustworthy.American Council on Aging.Understand Medicaid’s Look-Back Period; Penalties, Exceptions & State Variances. January 26, 2024Hoyt, Jeff. Senior Living.Nursing Home Costs in 2024. February 5, 2024.Backman, Maurie. The Motley Fool.Here’s the Average Annual Social Security Benefit in 2024 – and Why It May Not Be Enough for You. January 7, 2024.Chidambaram, Priya and Burns, Alice. KFF.A Look at Nursing Facility Characteristics Between 2015 and 2023. January 5, 2024.American Council on Aging.Medicaid Eligibility: Income, Asset & Care Requirements for Nursing Homes & Long-Term Care.ECR Planning.Do Retirement Savings (IRAs, 401Ks, Pensions) Count Against Medicaid Long Term Care Eligibility? Accessed February 2024.Krause, Dale, JD, LLM. American Bar Association.Practical Information for Lawyers: IRAs: The Problem Asset Related to Medicaid. September 20, 2022.American Council on Aging.How Medicaid planning trusts protect assets and homes from estate recovery.American Council on Aging.Understand Medicaid’s look-back period; penalties, exceptions & state variances.American Council on Aging.Medicaid estate recovery programs: when Medicaid can and cannot take one’s home.
Verywell Health uses only high-quality sources, including peer-reviewed studies, to support the facts within our articles. Read oureditorial processto learn more about how we fact-check and keep our content accurate, reliable, and trustworthy.
American Council on Aging.Understand Medicaid’s Look-Back Period; Penalties, Exceptions & State Variances. January 26, 2024Hoyt, Jeff. Senior Living.Nursing Home Costs in 2024. February 5, 2024.Backman, Maurie. The Motley Fool.Here’s the Average Annual Social Security Benefit in 2024 – and Why It May Not Be Enough for You. January 7, 2024.Chidambaram, Priya and Burns, Alice. KFF.A Look at Nursing Facility Characteristics Between 2015 and 2023. January 5, 2024.American Council on Aging.Medicaid Eligibility: Income, Asset & Care Requirements for Nursing Homes & Long-Term Care.ECR Planning.Do Retirement Savings (IRAs, 401Ks, Pensions) Count Against Medicaid Long Term Care Eligibility? Accessed February 2024.Krause, Dale, JD, LLM. American Bar Association.Practical Information for Lawyers: IRAs: The Problem Asset Related to Medicaid. September 20, 2022.American Council on Aging.How Medicaid planning trusts protect assets and homes from estate recovery.American Council on Aging.Understand Medicaid’s look-back period; penalties, exceptions & state variances.American Council on Aging.Medicaid estate recovery programs: when Medicaid can and cannot take one’s home.
American Council on Aging.Understand Medicaid’s Look-Back Period; Penalties, Exceptions & State Variances. January 26, 2024
Hoyt, Jeff. Senior Living.Nursing Home Costs in 2024. February 5, 2024.
Backman, Maurie. The Motley Fool.Here’s the Average Annual Social Security Benefit in 2024 – and Why It May Not Be Enough for You. January 7, 2024.
Chidambaram, Priya and Burns, Alice. KFF.A Look at Nursing Facility Characteristics Between 2015 and 2023. January 5, 2024.
American Council on Aging.Medicaid Eligibility: Income, Asset & Care Requirements for Nursing Homes & Long-Term Care.
ECR Planning.Do Retirement Savings (IRAs, 401Ks, Pensions) Count Against Medicaid Long Term Care Eligibility? Accessed February 2024.
Krause, Dale, JD, LLM. American Bar Association.Practical Information for Lawyers: IRAs: The Problem Asset Related to Medicaid. September 20, 2022.
American Council on Aging.How Medicaid planning trusts protect assets and homes from estate recovery.
American Council on Aging.Understand Medicaid’s look-back period; penalties, exceptions & state variances.
American Council on Aging.Medicaid estate recovery programs: when Medicaid can and cannot take one’s home.
Meet Our Medical Expert Board
Share Feedback
Was this page helpful?Thanks for your feedback!What is your feedback?OtherHelpfulReport an ErrorSubmit
Was this page helpful?
Thanks for your feedback!
What is your feedback?OtherHelpfulReport an ErrorSubmit
What is your feedback?
