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Blog > Medicaid Planning > Medicaid Trusts: How to Use An Irrevocable Trust in Planning

Medicaid Trusts: How to Use An Irrevocable Trust in Planning

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February 3, 2022 Medicaid Planning

If you are planning in advance for long-term care, and hope to use Medicaid coverage down the road - then an Irrevocable Trust may be right for you. Sometimes referred to as a “Medicaid Trust”, these legal products can be a very helpful spend down tool, especially if you have a little time on your side. 

Medicare Doesn’t Cover Long-Term Care

Medicare doesn’t cover long-term care; it will cover short stays in an assisted living facility or hospital, but it will not cover any type of long-term care that someone will need for, in many cases, the rest of their lives.

So then you may begin to wonder, is there another way I can help pay for my long-term care without depleting my nest egg? That’s where a Medicaid Asset Protection Trust comes in.


What is a Medicaid Asset Protection Trust (MAPT)?

A Medicaid Asset Protection Trust, sometimes called Irrevocable “income only” trust or Medicaid Trust, is a trust that can be used to protect someone’s assets when they apply for Medicaid benefits.

How MAPT's Work

These trusts will need to be very specifically created and executed in order to follow Medicaid’s requirements. One of the main requirements is the trust must be irrevocable in that the trust can’t be changed or canceled once completed. This is to assure Medicaid that an applicant won’t put all their money in a trust, become approved by Medicaid and then cancel the trust in order to get all their money back. If the trust was revocable, Medicaid would then view all the assets in that kind of trust as countable assets.

The trust must also have a trustee who will receive the funds from the trust and must understand exactly how they are to be used - in many cases - for the care of the aging individual who created the trust. This trustee cannot be the aging individual nor their spouse, however, it can be an 18+ child.

Because the assets that are in one of these trusts are no longer considered to be owned by the applicant, the assets will not have to be spent down. So, for Medicaid purposes, you will become Medicaid eligible once you transfer all your extra assets into the trust.

Types of Assets 

What kinds of assets can you put in a Medicaid trust? While it may differ slightly based on state, assets you can usually put in a trust are:

  • Houses
  • Stocks
  • Bonds
  • Savings & Checking Accounts
  • Mutual funds
  • CDs

Benefits of MAPT

While there are many benefits of Medicaid trusts, the largest two are:

The trust will protect your assets. Saving the person needing care thousands, these trusts are a great tool to be used in Medicaid planning. The applicant will not go broke attempting to pay for their care and they can even, possibly, leave assets behind once they pass away.

State can’t collect on a MAPT. If the aging individual does pass away and created a MAPT, the state will not be able to collect any funds from the MAPT for any care the state paid for.

To learn about the average cost of in-home care in your area or get an estimate of how much you could save on care costs, use our free calculator. It’s easy to use and can provide great insight into your care options.



What About Gifting Assets?

If you prefer to simply give away your assets rather than put them all in a trust, the person receiving care may receive a large penalty if not done within the five year look back period. If you need care immediately, or within the next few years, you may want to rethink simply gifting away your assets.

Find out which strategy works best for you by using our free planning wizard which will outline your planning options within minutes!  


Alternatives to MAPTs

There are alternatives to using a Medicaid Trust. A few of those other options include:

  • Irrevocable funeral trusts: set aside up to $15,000 (in most states) of funds for your end-of-life expenses and provide your loved ones with peace of mind
  • Promissory Note: contract between two parties that helps spend down assets in exchange for future payments, however, it may not be available in your state
  • Medicaid Compliant Annuities: put your excess assets into this annuity to become Medicaid eligible while avoiding depleting your nest egg to receive care
Need free planning advice? call us today! (844) 412-4222



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