You’ve spent your life building a home and savings that you want to pass on to your family. At some point, though, you will probably need long-term health care, which can quickly drain your resources.

Nursing homes and long-term custodial care cost thousands of dollars a month – and Medicare won’t cover these expenses. Because long-term care is so pricey, a majority of Americans rely on Medicaid to pay. Medicaid, however, is a program for people with lower incomes. To qualify, most people have to spend down their assets, leaving little for their loved ones when they pass.

Here’s what to know about one option that allows you to pay for your care while maintaining your savings, home, and retirement: a Medicaid Asset Protection Trust (MAPT).

Understanding Medicaid eligibility

Every state has different regulations to qualify for Medicaid, but in general, these plans are geared toward people with low incomes and few assets. If you are 65 or older:

• Income – You can earn no more than $2,982 a month for an individual or $5,864 for a couple applying. If one spouse doesn’t need Medicaid to pay for long-term care, that spouse can earn up to $4,066.50 a month.
• Assets – You can have $2,000 for an individual and $4,000 for a couple applying for Medicaid. Many states allow you to keep more of your assets, though. In most states, a spouse not applying for Medicaid can have much more, often greater than $160,000.

Assets that are not counted toward your Medicaid eligibility include:

• Your home, if a spouse is living there (and it meets Medicaid equity requirements)
• One car
• Low-value life insurance policies
• Your personal property, including art and jewelry
• Your prepaid funeral expenses

Medicaid Asset Protection Trusts explained

A trust is a legal entity created to hold and protect your assets. A MAPT is a trust that is built specifically for keeping your assets from being counted toward your Medicaid eligibility. When a MAPT is created, a trustee is named – who is not you or your spouse – to manage the trust. This person must spend the trust funds strictly by the rules set in the trust. There will also be a beneficiary who has to be someone other than you, so Medicaid can’t count the trust funds as a way to pay for your long-term care expenses.

The MAPT is what’s known as an irrevocable trust. This means it can’t be changed. This also means the assets inside no longer belong to you.

Medicaid 5-year look-back rule explained

When you apply for Medicaid to cover your long-term care costs, most states will look over your financial transactions for the previous five years (except California, which looks back 30 months).

It’s important to note that you can’t create a MAPT during this five-year lookback period because Medicaid considers it a violation. You’ll need to set up the trust at least five years before you apply for Medicaid. Planning for this in advance can help you be proactive and avoid penalties down the road.

The look-back penalty explained

If your state Medicaid office tracks your finances and finds that you’ve had transfers that aren’t eligible, you will be assessed a penalty. Each state is different, but the state will typically take the value of money or property that was ineligible to be transferred and divide that by your state’s average monthly rate for a private nursing home room. When that number is determined, Medicaid won’t pay for your care for that number of months. For instance:

• You spent $50,000 on ineligible gifts in the five years before you applied for Medicaid.
• In your state, the average monthly rate for a private patient room is $10,000.
• You will be ineligible for Medicaid to cover your nursing home costs for five months.

Take control with legacy planning

It may feel like creating a MAPT means you lose all control of your assets. Though the trust feels restrictive, you will still have some flexibility as long as you stay within Medicaid’s financial limits.

If you don’t need to move into an assisted living facility, you can stay in your home. You may be able to sell it, and the trust can help you buy another one. This is a good option if you want to move closer to family or downsize as you age.

To keep your house, it has to qualify for Medicaid’s home equity interest limit in your state. Your home equity – the amount it’s worth minus what you owe against it – for 2026 is typically either $752,000 or $1,130,000, depending on the state. If you are under this limit, you can stay in your home.

If you are single and need to go to an assisted living facility for a specific period, you can write an intent to return letter and keep your home if it stays within the equity limits. If you need to move to an assisted living facility, the house is exempt from the equity rule if you have a spouse, child younger than 21, or someone who is blind or disabled living there.

As for assets in the trust that provide income, you can keep that money as long as it meets Medicaid guidelines. Your monthly income can’t be more than $2,982 for an individual applying for long-term care assistance in most states.

Is a MAPT right for you?

Creating a MAPT may not be for everyone, but you may want to consider it if:

• You can afford to create one – they cost between $2,000 and $12,000 – so it’s typically worthwhile if you have at least $100,000 in assets to protect.
• If you want to protect your home for your family. The assets in a MAPT can’t be confiscated by Medicaid as reimbursement for your care after you pass away (known as Medicaid Estate Recovery).
• You want to use it as an estate planning tool. You can decide who receives what is left in the trust when you pass away. Many states also allow you to change the beneficiaries if your circumstances change.
• You want to avoid the Medicaid spend-down but still need Medicaid to help pay for future health needs.
• You are healthy now, but want to plan for your long-term care expenses later in life.

If you are planning for your future healthcare expenses, a financial advisor and a licensed insurance agent at SmartMatch can help you determine if a MAPT aligns with eligible Medicare plans.