A Medicaid Asset Protection Trust is an estate planning tool sometimes used to protect assets while planning for long-term care.
How the Trust Works
Assets placed in the trust are no longer owned directly by the person who created it. Instead, they are managed by a trustee for the benefit of designated beneficiaries.
Because the assets are no longer owned by the individual, they may not be counted for Medicaid eligibility after a certain period.
The Five-Year Rule
Transfers to this type of trust are subject to Medicaid’s five-year lookback period.
If assets are transferred within five years of applying for Medicaid, a penalty may apply.
Common Uses
These trusts are often used to protect assets such as:
- Homes
- Investment accounts
- Savings
Proper Planning Is Essential
Medicaid Asset Protection Trusts must be carefully structured to comply with Medicaid rules. Families considering this option should seek professional guidance before creating a trust.
