The cost of long-term care can quickly drain a lifetime of savings. Many seniors and their families wonder: Is there a way to qualify for Medicaid without losing everything? The good news is yes. With careful planning, you can protect your home and other assets from Medicaid’s spend down rules.
According to AARP, long-term care costs continue to rise, making Medicaid an essential lifeline for many families. In this guide, we explain the difference between family trusts, revocable and irrevocable trusts, and how a Medicaid Asset Protection Trust (MAPT) works. We also explore other options like life estates and spousal transfers so you can feel confident about planning ahead.
How Do You Protect Assets from Medicaid Spend Down?
Spend down is the process of using your own money and property to pay for care until your remaining assets fall below Medicaid’s strict eligibility limits. In many states, this means having no more than about 2,000 dollars in countable assets, though rules vary by state.
Without planning, seniors may have to sell the family home, cash out retirement accounts, or drain savings just to qualify. The Genworth Cost of Care Survey reports that the median annual cost of a private nursing home room in 2023 was over 100,000 dollars, which shows just how quickly savings can disappear.
To make matters more challenging, Medicaid enforces a five-year look-back period. If you transfer assets within five years of applying, Medicaid may impose penalties and delay coverage. That is why it is so important to plan early, ideally before care is ever needed. You can learn more about spend down rules directly from Medicaid.gov.
Does a Family Trust Protect Assets from Medicaid?
A common misconception is that simply putting your home or money into a family trust will protect it. Unfortunately, a revocable family trust, the most common type used for estate planning, does not shield assets from Medicaid.
Because you maintain control of the assets in a revocable trust, Medicaid still counts them as yours. That means the house, bank accounts, or investments inside the trust could be subject to spend down.
Family trusts are useful for avoiding probate and simplifying inheritance, but when it comes to Medicaid, they provide no protection.
Does an Irrevocable Trust Protect Assets from Medicaid? (MAPT Trust)
The most reliable way to safeguard assets is with an irrevocable trust, often called a Medicaid Asset Protection Trust (MAPT).
Here is how it works:
- Assets like your home or investments are transferred into the trust.
- Since the trust is irrevocable, you give up legal ownership and control.
- After the five-year look-back period, Medicaid cannot count those assets when determining eligibility.
- You can still live in your home and may receive income from investments, depending on how the trust is written.
Example: If you place your home into a MAPT today and do not apply for Medicaid for at least five years, the home is fully protected. Medicaid cannot force its sale or claim it to pay nursing home bills.
The trade-off is that once assets are placed in a MAPT, you cannot take them back or sell them yourself. You will appoint a trustee, often a trusted family member, to manage them. Still, for many families, this is a worthwhile exchange for keeping a home or nest egg safe.
Revocable vs. Irrevocable Trusts
To make things clearer, here is a side-by-side comparison:
| Type of Trust | Who Controls It? | Medicaid Protection | Best Use |
|---|---|---|---|
| Revocable Trust | You keep full control | No protection | Avoiding probate, estate planning |
| Irrevocable Trust (MAPT) | Trustee controls assets | Yes, after 5 years | Protecting home, savings, investments |
The key difference is control. If you can change the trust or reclaim assets, Medicaid will still count them. If you give up control, Medicaid no longer considers them yours.
Other Medicaid Asset Protection Strategies
A MAPT is not the only option. Depending on your situation, these strategies may also help protect assets:
- Life Estate Deed: Lets you remain in your home for life while guaranteeing ownership passes to your heir after death. This may keep the home out of Medicaid’s estate recovery, but the five-year look-back still applies.
- Medicaid-Compliant Annuities: Convert large sums into income streams for a healthy spouse. This can speed up eligibility for the spouse needing care.
- Caregiver Child Exception: If an adult child lives with you and provides care for at least two years before you need nursing care, the home can sometimes be transferred to them without penalty.
- Spousal Transfers: Assets may be shifted to a healthy spouse in certain cases. The rules are strict and vary by state, so professional guidance is essential.
- Medical Divorce: In rare cases, couples choose to legally separate to protect the healthy spouse’s financial security. This is an emotional step and should only be considered after exploring all alternatives. You can read more in our guide to Medical Divorce & Nursing Home Expenses.
Because Medicaid planning is highly state-specific, it is wise to work with an elder law attorney who understands the rules where you live. The National Academy of Elder Law Attorneys (NAELA) is a great resource for finding qualified professionals.
What This Means for You and Your Family
- Plan early. The five-year look-back means last-minute moves rarely work.
- Revocable trusts do not protect assets. They are useful for estate planning but not Medicaid.
- Irrevocable trusts (MAPTs) do work. They are the strongest way to shield assets if set up in advance.
- Other tools exist. Life estates, annuities, and caregiver exceptions may apply.
- Professional advice is vital. Medicaid rules are complex and state-specific.
FAQs: Protecting Assets from Medicaid
How do you protect assets from Medicaid spend down?
The most reliable method is to set up a Medicaid Asset Protection Trust at least five years before applying. Other options include life estates, annuities, and spousal transfers.
Does a family trust protect assets from Medicaid?
No. Revocable trusts still count as your assets, so they provide no protection.
Does an irrevocable trust (MAPT) protect assets from Medicaid?
Yes. Once assets are in the trust and five years have passed, Medicaid cannot count them or seize them for repayment.
What is the difference between a revocable and irrevocable trust?
Revocable trusts are flexible but do not protect assets. Irrevocable trusts give up control but provide protection.
What happens if you transfer assets too late?
Transfers made within five years of applying for Medicaid may trigger penalties and delay eligibility. ElderLife provides a clear overview of these rules.
Planning Ahead Gives You Options
Medicaid planning is not only about money. It is about peace of mind. With the right steps, seniors can receive the care they need while preserving a home, savings, and a financial legacy for loved ones.
Even though the rules can feel overwhelming, resources are available to help. Elder law attorneys, financial advisors, and supportive communities like OurSeniorSafety.com can guide you through the process.
Protecting your assets from Medicaid is not about giving up control of your future. It is about planning for it. With the right plan in place today, you can enter tomorrow with confidence, knowing that your care needs will be met and your family’s future secured.