How to Protect Your Home From Medicaid

An individual can protect their assets from Medicaid, including their home, by placing them into a trust. Essentially, the assets become owned by the trust and not by the individual. This mechanism can decrease the individual’s asset count for Medicaid eligibility, presenting a way to potentially conserve wealth and secure necessary medical care. However, like all decisions, this presents benefits and potential risks. Consulting a financial advisor as you navigate these complexities can help balance asset protection and accessibility to medical care.

What Assets Count for Medicaid?

Medicaid is a U.S. health program for low-income individuals and families, as well as others in need.

Medicaid, the U.S. health program for low-income individuals and families, comes with its fair share of eligibility requirements. The program takes into account both income and assets when determining eligibility.

Medicaid considers an individual’s assets through the “means test” process. Assets counted, which depends on the state you are in, include cash, bank accounts, retirement accounts, real estate and vehicles, with specific limits that can change annually depending on the state.

However, this doesn’t encompass all assets. Exempt ones typically comprise a person’s primary residence, some personal belongings, one vehicle and prepaid funeral and burial expenses. Non-exempt assets, counted by Medicaid, cover bank accounts, stocks, bonds, and second homes. For instance, if an individual holds a significant amount in stocks, those would count toward the Medicaid asset test, potentially affecting their eligibility.

Is It Necessary to Put Your Primary Residence in a Trust to Protect It From Medicaid?

An applicant’s primary home is typically exempt from the Medicaid asset limit, so placing it in a trust usually isn’t necessary. If you are temporarily living elsewhere, like a nursing home or hospital, your home still usually qualifies as your primary residence. Medicaid also typically disregards the value of your home if your spouse or certain dependent relatives are living there.

However, if the home isn’t your primary residence or your equity in it exceeds a certain limit, you may need to transfer the property to a trust to protect it from Medicaid.

States have different rules regarding this equity limit, and it’s essential to consult your state’s Medicaid program for specific details. In 2025, these equity limits range from $730,000 to $1,097,000, depending on the state.

What Is the Medicaid Look-Back Period?

The Medicaid look-back period is a stipulated duration during which Medicaid examines an applicant’s financial transactions to see if any assets were transferred for less than fair market value. This period stands currently at 60 months across most states.

For example, if Jane, a retired nurse, transferred her beach house to her children during the look-back period to qualify for Medicaid, this could lead to a penalty period of Medicaid ineligibility. Therefore, strategic Medicaid planning should consider this look-back period to prevent potential penalties.

How to Protect Assets From Medicaid With a Trust

A man signs documents setting up Medicaid asset protection trust.

Trusts can be used to reduce countable assets for Medicaid eligibility, but the type of trust matters. A revocable living trust does not provide Medicaid protection, since the assets remain under the grantor’s control and are therefore still considered available. By contrast, an irrevocable trust, such as a Medicaid asset protection trust (MAPT), transfers ownership of the assets out of the individual’s estate and places them under the control of an appointed trustee.

Medicaid Asset Protection Trusts (MAPTs)

A MAPT is an irrevocable trust specifically designed to hold assets in a way that excludes them from Medicaid’s means test. When someone creates a MAPT, they give up legal ownership and control of the assets, though they can still name beneficiaries and may retain the right to live in the home or receive income generated by the trust. Because these assets are no longer accessible to the applicant, they are typically not counted when Medicaid evaluates eligibility.

However, timing is key. If assets are transferred into the trust within Medicaid’s five-year look-back period, the applicant may be subject to a penalty period of ineligibility. That’s why MAPTs are often used proactively, years in advance of anticipated long-term care needs.

What Can Be Placed in a MAPT?

Common assets placed in MAPTs include a primary residence, vacation property, bank accounts, brokerage accounts and sometimes business interests. Retirement accounts like IRAs generally aren’t placed into the trust due to tax complications, but non-qualified investments often are. Once transferred, these assets can no longer be sold, spent or gifted by the grantor, but the trust may allow limited income to flow back to them.

Considerations Before Using a Trust

Using a MAPT can protect wealth and preserve inheritance, especially for families concerned about the cost of long-term care. But it also comes with trade-offs: the person creating the trust gives up control of the assets, cannot undo the transfer, and may face unintended tax or estate consequences. It’s a legal strategy that should be tailored to the individual’s circumstances and planned well ahead of time, especially given the constraints of the look-back period.

Other Implications of Shielding Assets From Medicaid

Shielding assets from Medicaid carries more than just financial considerations – it entails crucial moral implications as well. Some view it as wealth preservation, while others may perceive it as exploiting a system intended to aid those in need. It’s essential to weigh these ethical considerations and conduct any form of Medicaid planning within strict legal bounds.

How It Helps Lower- and Middle-Class Families

By protecting assets, we can prevent a healthy spouse from ending up impoverished when the other requires long-term care, and shield the family home from being sold to cover medical expenses. This is crucial, particularly for lower and middle-class families who might face severe financial hardship due to long-term care costs.

For instance, in a scenario where John, a retired teacher, requires long-term care and has to use Medicaid, the program cannot seek repayment from his primary residence, provided it’s in an irrevocable trust.

Bottom Line

While primary residences typically aren’t considered in a person’s Medicaid application, there are certain circumstances where a home is not exempt from Medicaid’s asset limits. In these cases, an irrevocable trust like a Medicaid asset protection trust (MAPT) can protect a home from Medicaid, provided its transferred to the trust beyond the range of the five-year look-back period.

Long-Term Care Planning Tips

Long-term care can be exceedingly expensive. In 2024, the median cost of a private room in a nursing home was $10,646 per month, according to Genworth. However, long-term care insurance can help you cover those costs. Here’s a look at some of the best long-term care insurance providers.
Working with a financial advisor may help you plan and save for future health care expenses. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.