Medicaid Asset Protection Trusts in New York

Long-term care is expensive. A single year in a nursing home can cost $150,000 or more in Westchester County. Home care services, if needed for extended periods, can deplete a lifetime of savings. For many families, the prospect of long-term care expenses raises a difficult question: how can we preserve assets for our children while ensuring that Medicaid will cover the cost of necessary care?

The answer, for families with time to plan, is the Medicaid asset protection trust (MAPT). A properly structured MAPT allows a New York resident to remove assets from personal ownership, shield them from Medicaid spend-down requirements, and still provide a safety net for the family. This guide explains how MAPTs work, what assets can be placed in them, the timing requirements, and the specific rules that apply in Westchester County and New York.

What Is a Medicaid Asset Protection Trust?

A Medicaid asset protection trust is an irrevocable trust designed specifically to allow a person to protect assets from being consumed by long-term care costs before Medicaid eligibility is established. Unlike a revocable living trust (which the grantor can modify or revoke at any time), an MAPT strips the grantor of ownership and control permanently. In exchange for that sacrifice, Medicaid treats the trust assets as if they do not belong to the grantor, provided the trust was created and funded well in advance of any application for benefits.

The key word is irrevocable. Once the MAPT is in place and funded, the grantor cannot change his or her mind, cannot revoke it, cannot retrieve the principal, and cannot modify the trust terms. Many people find this commitment uncomfortable. But it is precisely that irrevocability that makes the trust invisible to Medicaid’s asset tests.

The Medicaid Look-Back Period in New York

Medicaid’s asset protection mechanism relies on a look-back period. When a person applies for Medicaid to cover long-term care costs, Medicaid examines all financial transactions occurring within a specified period before the application. If the agency finds transfers to a trust (or any non-exempt transfer), it imposes a penalty period during which Medicaid will not pay for care. The beneficiary must pay privately until the penalty period expires.

As of March 28, 2024 (the effective date of provisions in the New York 2024-25 budget), the look-back periods are:

Home care (Medicaid waiver programs): 30 months (changed from 0 months).

Nursing home care: 60 months.

This means that if a Westchester resident transfers assets to a MAPT, they must wait at least 30 months before applying for Medicaid to cover home care, or 60 months before applying for Medicaid to cover nursing home services. If the application is made too soon, Medicaid imposes a penalty period (effectively a waiting period during which the beneficiary pays privately for care).

The extension of the look-back period for home care is relatively recent and reflects a significant shift in New York’s Medicaid policy. Families accustomed to the prior rule (zero-month look-back for home care) should note that the landscape has changed substantially.

How the Penalty Period Works

When Medicaid discovers a transfer to a trust within the look-back period, it calculates a penalty period. The calculation works as follows:

Take the value of the transferred assets and divide by the average monthly cost of long-term care in New York (approximately $12,000 to $15,000 per month, depending on the type of care). The result is the number of months during which Medicaid will not cover costs.

Example: A grantor transfers $300,000 to a MAPT in January 2024 and applies for Medicaid nursing home coverage in February 2026 (less than 60 months later). Medicaid imposes a penalty equal to $300,000 divided by the average monthly care cost. If that cost is $14,000 per month, the penalty period is approximately 21 months. The family must pay privately for care during those 21 months. After 21 months, Medicaid begins to cover costs.

This is why the timing of funding is critical. A transfer made within the look-back period does not prevent Medicaid eligibility; it simply delays it and requires private payment in the meantime.

The Structure of an MAPT: Irrevocability and Control

An MAPT must meet several requirements to be recognized by Medicaid as a legitimate protective mechanism. The most fundamental requirement is irrevocability. The grantor (the person creating the trust) cannot retain any power to revoke, amend, modify, or terminate the trust. This is non-negotiable.

However, irrevocability does not mean the grantor has zero connection to the trust. Instead, the grantor can retain certain rights:

Income rights. The grantor can retain the right to receive income produced by trust assets: interest, dividends, rental income, and capital gains from asset sales. These income distributions do not compromise the trust’s Medicaid-protective function.

Principal rights. The grantor cannot retain the right to receive principal (the original assets or a portion of them). Any principal distribution made to the grantor is treated by Medicaid as a transfer, which can trigger additional penalties.

Health, education, maintenance, and support. Some MAPT designs include provisions allowing the trustee to distribute principal to the grantor for health, education, maintenance, or support (often called “HEMS” distributions). This design is legally permissible but carries a risk. If the trustee makes distributions during the look-back period, Medicaid may view those distributions as transfers and impose penalties. Many MAPTs are structured to prohibit such distributions entirely during the initial look-back period.

Trustee discretion. The trustee (typically an adult child, not the grantor or spouse) may have discretion to make distributions to the grantor and other beneficiaries for various purposes. This discretionary power is separate from the grantor’s rights. It belongs to the trustee, not the grantor, and does not compromise the trust’s protective nature.

Who Should Serve as Trustee?

The trustee of an MAPT is the person who manages the trust, receives income, and decides whether to make distributions to beneficiaries. Trustee selection is important because the trustee must be someone the grantor trusts implicitly and someone who is not the grantor or the grantor’s spouse.

If the grantor or spouse serves as trustee, Medicaid will treat the trust as if the grantor retains control and therefore ownership. The protective function disappears entirely.

The most common choice is an adult child who has demonstrated financial responsibility, sound judgment, and loyalty to the family’s interests. Some families appoint a corporate trustee (a bank or trust company) or a combination of family and corporate trustees. The key is ensuring that decisions are made in the beneficiary’s interest rather than the grantor’s.

Assets Commonly Placed in an MAPT

An MAPT can hold many types of assets:

The family home. In Westchester County, where home values frequently exceed $1,000,000, the family residence is often the largest asset. Placing the home in an MAPT removes it from the countable assets for Medicaid purposes. However, if the primary residence is transferred within the look-back period, the entire value of the home is subject to the penalty period calculation.

Savings and investment accounts. Bank accounts, money market funds, and brokerage accounts can be transferred to an MAPT. These liquid assets are easily transferred and managed within the trust structure.

Investment securities. Stocks, bonds, and mutual funds held in an MAPT produce income (dividends and interest) that can be distributed to the grantor and other beneficiaries.

Real property other than the primary residence. Vacation homes, rental properties, and investment real estate can be held in an MAPT.

Life insurance policies. Some MAPT designs include life insurance, which can provide liquidity to pay taxes, administration costs, or provide bequests to family members outside the trust.

The Home in an MAPT: Special Considerations

The family home deserves special attention because it is often the largest and most emotionally significant asset.

STAR exemption. If the home qualifies for the STAR (School Tax Relief) exemption, placing the home in an MAPT does not necessarily disqualify it. Many MAPT designs preserve STAR eligibility, though the requirements are technical. Proper documentation and compliance with Department of Taxation rules are essential.

Capital gains step-up. At death, assets typically receive a “stepped-up” basis equal to the fair market value on the date of death. This means that if the home appreciates significantly after being placed in the MAPT, the grantor’s heirs inherit the home with a higher basis, potentially reducing capital gains tax if the property is later sold. This benefit applies provided the home is not included in the grantor’s taxable estate at death, which depends on whether the grantor retained any “incidents of ownership” under federal estate tax law (IRC Section 2036).

A properly drafted MAPT does not retain incidents of ownership and therefore does not trigger estate tax inclusion. This allows the family to receive both Medicaid protection and the capital gains step-up.

Mortgages and encumbrances. If the family home has an outstanding mortgage, the property can still be transferred to an MAPT. The mortgage remains a lien on the property. The MAPT structure allows the trustee to manage the property and make mortgage payments. However, if the grantor retains the right to occupy the home and is responsible for mortgage payments, Medicaid may view this as evidence of retained control. Careful planning is needed.

Timing: The Critical Element

The look-back periods make timing the single most important element of MAPT planning. An MAPT created and funded today will not provide Medicaid protection for 30 months (home care) or 60 months (nursing home care) thereafter.

This creates a challenge: MAPT planning only works for families who can anticipate long-term care needs far in advance. A person diagnosed with Parkinson’s disease at age 60 can create an MAPT and begin funding it, knowing that any long-term care needs are still 5, 10, or 15 years away. By that time, the look-back period will have passed, and Medicaid protection will be available.

By contrast, a person diagnosed with advanced dementia at age 82 may have only months or a few years before nursing home care becomes necessary. An MAPT created at that point provides no Medicaid protection because the look-back period cannot be satisfied.

This is why MAPT planning is often undertaken by individuals in their 60s or even 50s, not because long-term care is imminent, but because they want to be prepared should it ever become necessary.

MAPT Planning vs. Other Protective Structures

It is important to distinguish an MAPT from other types of trusts that may serve different purposes.

Supplemental needs trusts. A supplemental needs trust (also called a special needs trust) is designed to hold assets for the benefit of a person who receives means-tested government benefits (Medicaid or SSI). A supplemental needs trust holds assets outside the beneficiary’s personal ownership, so the trust assets do not reduce eligibility for benefits. However, a supplemental needs trust is created by a third party (typically a parent or grandparent) for the benefit of the disabled person. It is not created by the beneficiary for their own future protection. An MAPT, by contrast, is created by the future Medicaid applicant for their own protection.

Spendthrift trusts. A spendthrift trust is designed to protect assets from the beneficiary’s creditors or the beneficiary’s own poor judgment in managing money. A revocable living trust with spendthrift provisions is common in estate planning but provides no Medicaid protection because the grantor retains control.

Irrevocable life insurance trusts. An ILIT is designed to remove life insurance from the grantor’s taxable estate. An ILIT can be useful in estate tax planning but is not designed for Medicaid protection and does not serve the same function.

Gift Tax and Federal Estate Tax Considerations

When assets are transferred to an MAPT, several federal tax issues can arise.

Gift tax. Federal law permits each person to give away $19,000 per recipient per year (as of 2026) without using any portion of their lifetime exemption. Gifts exceeding $19,000 per recipient per year use a portion of the donor’s $15,000,000 lifetime exemption. However, a gift to an irrevocable trust may not qualify for the annual exclusion if the beneficiary does not have a present interest in the gift (meaning the beneficiary cannot access the funds immediately). Some MAPT designs include “Crummey powers” that allow beneficiaries to withdraw gifts for a limited period, thereby qualifying the gifts for the annual exclusion. Trusts without Crummey powers may require the grantor to use lifetime exemption for any transfers exceeding the annual exclusion amount.

Portability. If the grantor is married, the grantor’s spouse may be able to use the grantor’s unused lifetime exemption at death through a process called portability. However, portability requires proper tax return filing and planning. An MAPT funded with the grantor’s assets does not directly affect the spouse’s ability to use portability, but the timing and structure of funding matter.

Return on assets. If the MAPT generates income, that income must be reported on the trust’s tax return (Form 1041). The grantor may be required to pay tax on that income (depending on whether the grantor is also a beneficiary receiving distributions). Proper tax reporting is essential.

Because federal tax law is complex and can interact with Medicaid law in counterintuitive ways, MAPT creation should always involve both an elder law attorney and a tax professional.

The Role of Westchester County DSS

Medicaid in New York is administered at the county level. In Westchester County, the Medicaid program is overseen by the Westchester County Department of Social Services (DSS). When a Westchester resident applies for Medicaid to cover long-term care, the application goes to Westchester County DSS.

Westchester County DSS will review the applicant’s assets, income, and any transfers made within the look-back period. If the agency discovers transfers to an MAPT, it will contact the applicant (and possibly the trust’s trustee) to request information about the trust. The applicant should be prepared to provide the trust instrument, evidence of funding, and records of any income or distributions.

Cooperation with the county agency is essential. Failure to disclose an MAPT or to provide requested information can result in application denial or legal consequences.

When to Create an MAPT

MAPT planning should be considered in the following circumstances:

Age and family history. Individuals in their 50s or 60s with a family history of Alzheimer’s disease, Parkinson’s disease, or other conditions requiring long-term care should evaluate MAPT planning. Creating an MAPT while healthy ensures the look-back period will be satisfied if care becomes necessary.

Significant assets. MAPT planning is most valuable for individuals with substantial assets (typically $500,000 or more). For smaller estates, the benefit may not justify the legal costs and ongoing management complexity.

Desire to preserve assets for heirs. If a primary goal is to leave assets to children or other heirs rather than spend them on long-term care, an MAPT is a powerful tool. The trade-off is accepting that assets must be permanently transferred and irrevocably committed to the trust.

Time to plan. Because the look-back periods are 30 or 60 months, MAPT planning requires advance notice. If long-term care is already anticipated within the next few years, the look-back period may not be satisfiable.

Common Mistakes in MAPT Planning

Several errors can undermine the protective function of an MAPT:

Insufficient advance planning. Waiting until a health crisis emerges to create an MAPT defeats the purpose. By then, the look-back period cannot be satisfied, and Medicaid protection is unavailable.

Retaining control. If the grantor or grantor’s spouse serves as trustee or retains the right to revoke the trust, Medicaid will treat the trust as a sham. The assets are counted as the grantor’s own assets.

Commingling trust and personal assets. If the grantor deposits personal funds into trust accounts or uses trust funds to pay personal bills, Medicaid may disregard the trust structure. Therefore, clear separation of trust and personal finances is essential.

Failing to fund the trust. Creating a trust document without actually transferring assets to the trust is valueless. The trust must be actively funded: property deeds transferred, accounts retitled, and beneficiary designations changed where appropriate.

Inadequate record-keeping. When Medicaid applies, the agency will request documentation of all transfers. The grantor or trustee should maintain meticulous records: deeds, bank statements, brokerage confirmations, and any correspondence regarding the trust. Years later, these records will be essential.

Cost and Ongoing Administration

Creating an MAPT involves both initial and ongoing costs.

Attorney fees. The cost of drafting an MAPT varies depending on the attorney’s hourly rate, the complexity of the family’s assets, and the care taken in structuring the trust. A well-drafted MAPT in Westchester County typically costs $2,500 to $5,000 or more.

Asset transfer fees. If real property is transferred to the trust, recording fees and possible transfer taxes may apply. New York imposes no transfer tax on gifts to irrevocable trusts, but local recording fees apply.

Tax preparation. The MAPT will require its own tax return (Form 1041) if it generates income. Annual tax preparation costs should be anticipated.

Trustee compensation. If a corporate trustee or professional trustee is used, annual fees apply. If a family member serves as trustee, compensation may or may not be charged, depending on family custom and the complexity of the trust’s management.

Medicaid application. When the time comes to apply for Medicaid, an elder law attorney can guide the applicant through the application process and respond to Medicaid’s inquiries about the MAPT. Application costs are typically $1,500 to $3,000.

While these costs are not insignificant, they are modest compared to the assets preserved and the long-term care costs avoided.

MAPT Planning as Part of a Comprehensive Estate Plan

An MAPT should not be created in isolation. It should be part of a comprehensive estate plan that addresses:

The revocable living trust. The grantor likely has other assets (personal items, certain bank accounts, perhaps life insurance) that should be held outside the MAPT. A revocable living trust provides an efficient mechanism for managing those assets and avoiding probate at death.

Durable power of attorney. A durable financial power of attorney designates someone to manage financial affairs if the grantor becomes incapacitated. This is essential if the MAPT trustee is an adult child in a different state or someone not involved in daily financial management.

Health care proxy. A health care proxy (also called a health care power of attorney) designates someone to make medical decisions on the grantor’s behalf if the grantor cannot do so. This is especially important given that the MAPT planning is motivated by the possibility of long-term care.

Will. A will ensures that any assets remaining outside the MAPT (or assets that later revert to personal ownership) are distributed according to the grantor’s wishes.

Medicaid Planning as an Ongoing Process

Medicaid law changes frequently. Rules about look-back periods, asset limits, and the treatment of trusts evolve. A MAPT created today should be reviewed periodically to ensure it remains compliant with current law and to verify that the trust is being administered correctly.

If the grantor’s circumstances change (if significant gifts are made, if income sources shift, if family relationships alter), the estate plan and the MAPT may need adjustment.

Annual consultations with an elder law attorney can help ensure that the MAPT continues to serve its intended protective function.

A Final Note

A Medicaid asset protection trust is a sophisticated planning tool. It requires foresight, a willingness to part with assets irrevocably, and careful attention to timing and structure. It is not appropriate for every family or every situation. But for Westchester County residents with substantial assets, a desire to preserve wealth for heirs, and sufficient time to satisfy the look-back period, an MAPT can be a powerful vehicle for protecting assets while ensuring access to Medicaid coverage if long-term care becomes necessary.

The decision to create an MAPT is deeply personal. It involves trade-offs between control and protection, between immediate access and future security. An experienced elder law attorney can help you evaluate whether an MAPT is right for your family, structure the trust correctly, and integrate it into your comprehensive estate plan.

Westchester County has seen significant growth in MAPT planning over the past decade, especially since the extension of the home care look-back period in 2024. If you are considering an MAPT or have questions about how one might fit into your estate and long-term care planning, we encourage you to reach out. The time to plan is now, while you are healthy and the choices are entirely your own.