Medicaid Planning 2026 - Medicaid Asset Protection Trust (MAPT)

Attorney RJ Connelly III Certified Elder Law Attorney Professional Fiduciary

"As part of our ongoing Medicaid 2026 blog series, I want to help you navigate one of the most important—yet commonly misunderstood—planning tools for long-term care: Medicaid Asset Protection Trust (MAPT)," said professional fiduciary and certified elder law Attorney RJ Connelly III. "With Medicaid eligibility and asset protection rules constantly changing, having the right information is crucial. My goal is to break down how MAPTs work, why they are valuable, and how you can use them to secure your financial future and safeguard your family’s well-being."

A Brief Review of Long-term Care Costs and Medicaid

As we have pointed out previously, long-term care costs in the United States are rising dramatically, with many people facing monthly nursing home bills that can quickly drain even substantial savings. The average monthly cost of a private room in a nursing home can exceed $10,000, and assisted living facilities often charge several thousand dollars each month. These expenses add up quickly, placing a significant financial burden on families who may not have planned for such costs over the long term.

Medicaid is a government program that helps cover these costs for those who qualify, but strict financial limits often require people to “spend down” their assets to meet eligibility requirements. This means individuals must reduce their savings and other countable assets—such as retirement accounts, investments, and even the equity in their family home—to levels set by Medicaid guidelines, which are typically quite low. Only after meeting these criteria can Medicaid cover ongoing care expenses.

How Medicaid Asset Protection Trusts Work

MAPTs are specifically designed to shield assets from being counted toward Medicaid eligibility. The trust must be irrevocable, meaning once you establish it and transfer assets, you cannot modify or dissolve it at will. The trustee, whom you appoint, is responsible for managing the assets according to the terms you set forth in the trust document. Although you may receive income from the trust, such as dividends or rental payments, you are prohibited from accessing the trust principal—this restriction is crucial for Medicaid compliance.

When setting up a MAPT, it’s common to transfer real estate, savings, or other valuable assets into the trust. The five-year “look-back” period is a critical factor: Medicaid reviews asset transfers made within five years prior to your application. If assets are moved into a MAPT during this period, Medicaid may impose a penalty, delaying your eligibility for benefits. Therefore, strategic, early planning is essential, and working with an attorney who specializes in elder law or Medicaid planning can help ensure all requirements are met and your assets are protected for your heirs.

Upon your death, the assets held in the MAPT bypass probate and are distributed directly to your beneficiaries, such as your children or other loved ones. This not only preserves your legacy but also prevents the state from recovering Medicaid costs from your estate. The deliberate structure of MAPTs provides both asset protection and peace of mind, but the rules surrounding them are complex—professional advice is highly recommended to avoid costly mistakes and maximize the trust’s effectiveness.

The Benefits of Medicaid Asset Protection Trusts

There are multiple benefits of these trusts, which include:

Protection of Assets: Through proper planning and certain legal strategies, you can protect your assets from being depleted by the high costs of nursing home or assisted living care. By doing so, your home and savings remain intact and can be passed on to your loved ones as an inheritance, rather than being used to pay for long-term care expenses. This approach helps secure your family's financial future and ensures that your life's savings benefit those you care about most.

Medicaid Eligibility: MAPTs are specifically designed to hold assets such as cash, investments, or real estate, so they are not counted as your personal resources when applying for Medicaid. By transferring assets into a MAPT, you begin a “look-back” period—typically five years—after which those assets are shielded from Medicaid eligibility calculations. This strategic planning allows you to preserve wealth for your heirs while still meeting Medicaid’s strict asset limits, ensuring access to long-term care without depleting your savings.

Estate Planning: By transferring ownership of assets to the trust, you can ensure that these assets are no longer counted toward Medicaid eligibility, which can be crucial for long-term care planning. Additionally, because the assets are held in the trust, they typically do not go through probate upon your death, streamlining the inheritance process for your heirs and reducing administrative costs. MAPTs can also help minimize estate taxes by removing assets from your taxable estate, potentially saving your beneficiaries significant amounts of money and preserving more wealth for future generations.

Peace of Mind: Knowing your wishes are protected provides comfort during uncertain times. This reassurance stems from the fact that your intentions regarding your assets, healthcare, and personal matters will be honored, even if you are unable to communicate them yourself. Having these protections in place can ease anxiety for both you and your loved ones, allowing everyone to focus on important decisions with greater peace of mind.

The Shortcomings and Limitations of MAPTs

As with most things, there are also shortcomings, including the following:

Irrevocability: As discussed, once assets are placed in a MAPT, the person transferring them—known as the grantor—loses direct ownership and control over those assets. This means you cannot sell, transfer, or otherwise manage the assets as you did before, since the trust becomes the legal owner. Additionally, the terms of the trust are generally irrevocable, meaning you cannot change the trust's beneficiaries, revoke the trust, or alter its terms after it is created. This loss of control is intentional, as it helps ensure the assets are not counted for Medicaid eligibility.

Complexity and Costs: Establishing and maintaining a MAPT requires legal counsel specializing in estate planning and elder law. These experts ensure that the trust is structured in compliance with relevant regulations and tailored to the client’s specific needs. While there are initial setup costs and ongoing administrative fees associated with maintaining the trust, these expenses are generally modest relative to the substantial value of the assets being safeguarded. The protection afforded by a MAPT can significantly outweigh the financial investment required, providing long-term security and peace of mind.

Timing: The five-year rule, often referred to as the "look-back period," means that when someone applies for Medicaid to cover long-term care costs, the state will examine all asset transfers made within the past five years. If assets—such as money, property, or other valuables—were given away or sold for less than their fair market value during this period, Medicaid may impose a penalty. This penalty typically delays Medicaid eligibility based on the value of the transferred assets. It's important to carefully plan any transfers well in advance to avoid these penalties and ensure timely Medicaid approval.

Not All Assets Are Eligible: Some assets, such as certain retirement accounts, may not be appropriate for a MAPT. This is because transferring retirement accounts, such as IRAs or 401(k)s, into a trust can trigger tax consequences, including immediate taxation of the transferred funds. Additionally, most retirement accounts are subject to specific rules that restrict ownership changes and may not permit a trust to be named as the owner, though a trust can sometimes be named as a beneficiary. It is important to consult with a professional fiduciary or estate planning attorney to determine the best approach for these assets.

Gifting Assets vs. Using a MAPT

While outright gifts may appear straightforward for reducing countable assets to meet Medicaid eligibility, they often carry significant drawbacks. For example, gifts made within Medicaid’s “look-back” period—typically the five years before applying—can result in a penalty period during which the individual is ineligible for Medicaid coverage.

Additionally, once assets are transferred to a child or another individual, those assets are no longer under your control and could be lost if the recipient faces lawsuits, creditors, bankruptcy, or a divorce settlement. There is also a risk of family disputes if expectations regarding the use or return of the assets are not clearly documented.

By contrast, a MAPT is specifically designed to protect assets while still allowing individuals to qualify for Medicaid. Assets placed in a MAPT are managed by a trustee in accordance with the rules you establish, ensuring your wishes are followed. Since the assets are owned by the trust—not by you or your children—they are generally shielded from personal creditors and marital claims of the beneficiaries.

MAPTs also help avoid unintended tax consequences, such as the loss of a step-up in basis for inherited assets, which can occur with outright gifts. Overall, using a MAPT provides a structured, legally secure, and tax-advantageous way to plan for long-term care without exposing your assets to unnecessary risks.

Types of Assets That Can Go Into a MAPT

Common assets placed in a MAPT include:

• Primary residences and vacation homes

• Bank accounts and certificates of deposit

• Brokerage and investment accounts

• Some life insurance policies

• Other valuable personal property

Not all assets are suitable—retirement accounts, for example, are generally excluded, and the rules can be complex. Consulting with an experienced attorney ensures the trust is properly funded.

MAPT Rules Vary By State

Because MAPT rules and Medicaid eligibility requirements differ from state to state, it is essential to ensure that your trust is structured according to the specific laws governing your assets and residency. State regulations dictate which assets are exempt, how trusts are drafted, and how the Medicaid look-back period is applied, making it important to consult a knowledgeable attorney who can navigate these complexities.

Attorney Connelly’s licensure in Rhode Island, Connecticut, and Massachusetts provides a distinct advantage for clients in Southern New England. His familiarity with each state’s legal landscape enables him to design MAPTs that fully comply with local requirements, streamlining the process for individuals with property or legal interests across multiple states. This comprehensive approach means you won’t need to hire separate attorneys for each jurisdiction, saving time and reducing complexity in your estate planning.

Medicaid’s Estate Recovery Program

Although we already covered this in a blog post, we believe it's important to revisit it in the context of MAPTs. One of the goals of Medicaid’s Estate Recovery Program is to recover costs paid for long-term care from the estates of deceased Medicaid recipients, often by placing a claim on their home or remaining property. Assets placed in a properly structured MAPT are typically shielded from estate recovery, meaning your heirs receive your legacy, not the government. However, rules can be technical—professional guidance and proper trust setup are essential to ensure protection.

Alternatives to Medicaid Asset Protection Trusts

There are alternatives to MAPTs. They include:

Spending Down Assets: When individuals require long-term care, such as in a nursing home, they often must pay out-of-pocket from their personal savings until their assets and income fall below Medicaid eligibility thresholds. This process is known as "spending down." Unfortunately, spending down can rapidly deplete a person's savings, leaving very little financial support or inheritance for their family. It can significantly impact the family's financial stability and future plans, especially when resources are limited. In some cases, families may need to make difficult decisions about care and finances to ensure their loved one's well-being while preserving as much as possible for future generations.

Irrevocable Income-Only Trusts: In addition to MAPTs, there are other trusts designed primarily to generate income for beneficiaries. One common example is the income-only trust, also known as an income trust or income-producing trust. These trusts are structured so that the trust's assets generate income, such as interest, dividends, or rental payments, which is then distributed to beneficiaries on a regular basis. The principal typically remains in the trust and is not accessible to the beneficiary, helping preserve the assets for future needs or other beneficiaries.

Long-Term Care Insurance: Purchasing private insurance to cover long-term care is an alternative to relying on Medicaid, but there are important factors to consider. Premiums for long-term care insurance can be quite expensive, especially as you age or if you have pre-existing health conditions. Medical underwriting is often required, meaning insurers will assess your health history to determine eligibility and pricing, and some individuals may be denied coverage or face higher premiums if they are deemed high-risk. Additionally, these policies may impose restrictions on covered care or limit benefits, so it's crucial to carefully review the policy details before purchasing.

Personal Care Contracts: Formal agreements to pay family members for providing care—often referred to as personal care agreements or caregiver contracts—are legal documents that outline the terms and conditions under which a family member is compensated for caregiving services. To satisfy Medicaid requirements, these agreements must be established in writing prior to the commencement of care and should clearly specify the services to be provided, the frequency and duration of those services, the rate of compensation, and the method and timing of payment. Connelly Law can design these contracts to comply with the law and protect the individual receiving the services.

A Final Thought

Planning for Medicaid and asset protection is a complex process with high stakes for you and your family. At Connelly Law, our experienced team specializes in all aspects of elder law, including Medicaid planning, estate planning, probate, and more. We take the time to understand your personal situation, explain all your options in plain language, and build a strategy—including MAPTs and alternative solutions—that best secures your assets and meets your goals. Let us guide you with confidence and compassion so you can focus on your health and the people you love. Reach out today for a consultation and start protecting your future.

The information presented within this blog is intended exclusively for general informational purposes and should not be construed as legal, financial, or healthcare advice. The content, materials, and insights provided may not reflect the most recent developments in these fields and, therefore, should not be relied upon for personal or professional decisions. Further, this blog may contain links to third-party websites, which are included solely for the convenience of our readers. It is essential to note that Connelly Law Offices, Ltd. does not automatically endorse or recommend the contents of these external sites. Given the complexities and nuances of legal, financial, or healthcare matters, we strongly encourage individuals to consult a qualified attorney, a professional fiduciary advisor, or a healthcare provider regarding any specific issues or concerns. Your well-being and informed decision-making are of paramount importance to us.