Medicaid Asset Protection Trust

New York's Medicaid program is governed by Social Services Law § 366 and the federal Medicaid statute at 42 USC § 1396p. The single most consequential rule is the 60-month (five-year) institutional Medicaid lookback. When a New Yorker applies for nursing-home Medicaid, the local Department of Social Services reviews the 60 months immediately preceding the application date. Any uncompensated transfer in that window — a gift to a child, a transfer into a trust, a sale below fair market value — creates a transfer penalty calculated by dividing the value of the transfer by the regional monthly cost of care to produce a period of Medicaid ineligibility.

Community Medicaid — the program that pays for home-based personal care, certified home health agency services, and the Consumer Directed Personal Assistance Program (CDPAP) — was supposed to acquire its own 30-month lookback in 2020. Enforcement of the community lookback has been delayed repeatedly through the state budget process, and as of 2026 the community lookback is still not being enforced. Plan as if it will be, and verify the current enforcement status before any transfer.

The MAPT works by getting the transfer done — and the lookback clock started — long before institutional Medicaid is needed. After sixty months pass from the date the assets were funded into the trust, the trust assets are outside the lookback window and do not affect the grantor's Medicaid eligibility. The trust is, in this sense, a timing instrument; its value depends on the family starting the clock before crisis.

A Medicaid Asset Protection Trust must be irrevocable. New York's EPTL § 7-1.16 was amended in 1997 to make trusts presumptively irrevocable unless the instrument expressly reserves the right to revoke; we draft the MAPT instrument with explicit irrevocability language to leave no doubt. A revocable trust does not shield assets for Medicaid purposes — the agency treats assets in a revocable trust as still owned by the grantor for eligibility purposes.

The grantor cannot serve as trustee. Self-trusteeship is treated as retained dominion and control over the trust assets, which causes Medicaid to disregard the trust altogether. The trustee is typically an adult child or other trusted individual; co-trustees are permitted and often advisable. The grantor also cannot retain the right to receive principal distributions — that retained right would make the trust principal an available resource at any time and defeat the planning entirely.

The grantor may retain the right to receive income generated by the trust assets (a 'grantor retained income trust' for Medicaid purposes), the right to occupy the family home if the home is funded into the trust, and a limited testamentary power of appointment that lets the grantor change the ultimate beneficiaries by will. The combination preserves operational comfort during the grantor's life while removing the principal from the Medicaid calculation.

Drafting the trust agreement is only half the engagement. Funding — actually transferring the assets into the trust's name — is where most do-it-yourself MAPTs fail. An unfunded MAPT shelters nothing. For the family home, funding requires a new deed conveying the property from the grantor to the trustee as trustee of the MAPT; the deed must be drafted, signed, acknowledged, accompanied by TP-584 and RP-5217 forms, and recorded at the county clerk's office. STAR and senior exemptions must be re-claimed under the trust's ownership.

For bank accounts and brokerage accounts, funding requires either retitling the existing account or transferring the assets into a new account opened in the trust's name. Each financial institution has its own documentation requirements — Schwab will want a copy of the trust instrument and a Certification of Trust; Chase will want a different form. Some institutions require an EIN for the trust (we obtain it where needed), while others accept the grantor's SSN for grantor-trust purposes during the grantor's life.

Retirement accounts (IRA, 401(k), 403(b)) should not be funded into the MAPT during the grantor's lifetime. Retitling a retirement account triggers immediate income tax on the entire balance. Retirement accounts pass instead by beneficiary designation; we coordinate the beneficiary designations with the MAPT structure so the retirement assets either pour into the trust at death or pass directly to the named beneficiaries depending on the family's tax goals.

We draft most MAPTs as grantor trusts for income tax purposes. The grantor retains enough powers (typically the power to substitute assets of equivalent value under IRC § 675(4)(C), or another grantor-trust trigger) to be treated as the owner of the trust assets for income tax. Income generated by the trust is reported on the grantor's individual return, and — critically — the trust assets receive a stepped-up basis at the grantor's death under IRC § 1014. The grantor-trust status also preserves the grantor's IRC § 121 primary-residence exclusion on a sale of the trust-owned home during the grantor's lifetime.

For federal estate tax purposes, we draft to ensure the trust assets are included in the grantor's gross estate under IRC § 2036 — which causes the stepped-up basis to apply. Estate inclusion does not create a tax cost for most clients because the federal estate exemption is $15,000,000 per person for 2026 and permanent under Public Law 119-21, and the New York exemption is approximately $7.35 million. For ultra-high-net-worth clients who would owe estate tax on inclusion, the trust can be drafted differently to avoid IRC § 2036 — but the trade-off is loss of the stepped-up basis.

Estate recovery analysis turns on probate inclusion, not estate-tax inclusion. New York Medicaid estate recovery currently reaches only the probate estate of the deceased Medicaid recipient. Trust assets passing outside probate to the named beneficiaries — by trust terms, not by will — are beyond the reach of recovery. This is one of the principal reasons the MAPT structure matters even after the lookback clears: the trust delivers Medicaid eligibility during life and recovery protection after death.

The ideal MAPT client is between 60 and 70 years old, owns a home and modest liquid assets, has adult children who can serve as trustees, and is planning for a possible need for institutional care five or more years in the future. Starting the clock at 65 means the lookback is clear at 70 — comfortably ahead of the average age of nursing-home admission. Starting at 55 is also fine; the planning horizon is simply longer.

The MAPT is not appropriate when nursing-home care is imminent. Where the grantor is already in a facility or facing an admission inside the next twelve months, the planning shifts to crisis-Medicaid tools: spousal refusal under SSL § 366-3-a, promissory-note plans converting countable resources into income streams, exempt-asset conversions (paying off mortgages, prepaying funeral arrangements), and pooled income trusts for excess income. Funding a MAPT inside the 60-month lookback window does not accelerate eligibility — it just locks the assets up.

The MAPT is also not appropriate for clients who need ongoing access to principal. The defining feature of the trust — no grantor principal access — means the grantor's liquid net worth shrinks by the amount funded. Most clients fund the trust with the home (which they continue to occupy) and a portion of liquid assets, retaining other accounts outside the trust as a personal reserve. The right funding mix is part of the planning conversation.