Not all trusts are created for the same purpose. When it comes to protecting assets from long-term care costs and qualifying for Medicaid benefits, one specific type of trust stands out: the Medicaid Asset Protection Trust (MAPT). While many people are familiar with revocable living trusts or testamentary trusts, few understand how a MAPT differs-and why those differences matter. Contact us by either using the online form or calling us directly at 414-253-8500 for legal assistance.
What Is a Medicaid Asset Protection Trust?
A MAPT is an irrevocable trust designed specifically to protect assets from being counted for Medicaid eligibility purposes. It allows an individual to transfer ownership of certain assets into the trust, shielding them from the Medicaid "spend-down" requirements-so long as the transfer occurs at least five years before applying for benefits.
This trust helps preserve the value of the estate for heirs while maintaining compliance with state and federal Medicaid laws.
Core Characteristics That Set MAPTs Apart
While all trusts involve the legal transfer of assets from one party to another, MAPTs are uniquely structured to achieve Medicaid eligibility, which demands adherence to very specific rules. Here are the defining characteristics that distinguish MAPTs from other common types of trusts:
1. Irrevocability
MAPT: Always irrevocable. Once established and funded, the grantor cannot change the terms or reclaim ownership of the assets.
Other Trusts:
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Revocable Living Trust: Can be modified or revoked by the grantor at any time.
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Testamentary Trust: Created through a will and becomes irrevocable only after death.
Why it matters: Medicaid only disregards assets that the applicant no longer owns or controls. Revocable trusts do not provide this level of protection.
2. Medicaid Eligibility Protection
MAPT: Designed to protect assets from being counted toward Medicaid eligibility. After the five-year look-back period, assets in the MAPT are not considered "available resources."
Other Trusts:
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Revocable Trust: Offers no Medicaid protection; assets are fully countable.
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Irrevocable Life Insurance Trust (ILIT): Typically protects life insurance proceeds, not designed for Medicaid planning.
Why it matters: Only MAPTs are structured to comply with Medicaid rules and effectively shelter wealth from long-term care costs.
3. Access to Assets
MAPT: The grantor cannot access the principal but may receive income generated by trust assets.
Other Trusts:
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Revocable Trust: Full access to both income and principal.
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Discretionary Trust: Access is limited to what the trustee allows; may or may not be Medicaid-compliant.
Why it matters: In a MAPT, control is deliberately restricted to achieve asset protection goals.
4. Trustee Requirements
MAPT: The grantor cannot serve as the trustee. This is essential to demonstrate that the grantor has relinquished control over the trust assets.
Other Trusts:
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Revocable Living Trust: The grantor is often the trustee, maintaining complete control over the trust during their lifetime.
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Irrevocable Trusts (non-MAPT): May allow the grantor limited trustee powers depending on structure and intent.
Why it matters: Medicaid requires proof that the assets are no longer accessible or under the grantor's direct control. A third-party trustee ensures compliance.
5. Probate Avoidance and Estate Recovery Protection
MAPT: Assets in the trust avoid probate and are generally protected from Medicaid estate recovery. This ensures heirs receive assets cleanly, without court delays or reimbursement claims from the state.
Other Trusts:
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Revocable Trust: Avoids probate but does not protect assets from Medicaid estate recovery if they were used for care.
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Testamentary Trust: Subject to probate as it is created by a will.
Why it matters: If long-term care is a concern, only a MAPT provides dual protection-Medicaid eligibility now and asset protection after death.
6. Tax Treatment and Basis Adjustment
MAPT: Often structured as a grantor trust for tax purposes. This allows:
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Income to be taxed to the grantor
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Step-up in basis for assets upon death, minimizing capital gains taxes for heirs
Other Trusts:
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Revocable Trust: Also receives a step-up in basis
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Irrevocable Non-Grantor Trusts: May result in higher trust-level taxation and loss of step-up basis
Why it matters: A MAPT can protect assets for Medicaid and still offer favorable tax treatment, a combination not always available in other trust structures.
7. Planning Purpose
MAPT: Built solely for long-term care planning and Medicaid eligibility. It is tailored to asset protection in anticipation of high medical or nursing home costs.
Other Trusts:
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Revocable Trust: Used for general estate planning and probate avoidance
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Charitable Trust: Used to benefit a charitable organization and provide tax deductions
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Special Needs Trust: Designed to support a disabled beneficiary without affecting their eligibility for public benefits
Why it matters: MAPTs are focused, intentional tools. They should not be confused with trusts designed for other goals-even though those trusts may offer partial or overlapping benefits.
Contact an Attorney to Explore the Right Trust for Your Needs
Understanding the differences between a Medicaid Asset Protection Trust and other trust types is vital to making an informed decision about your future. A MAPT isn't the best choice for every individual-but for those planning ahead for long-term care, it can be a powerful and protective solution.
At Heritage Law Office, we help you evaluate your full range of planning options and guide you toward strategies that protect your family and preserve your wealth.
Call 414-253-8500 or contact us online to schedule a consultation with an experienced trust and Medicaid planning attorney.
Frequently Asked Questions (FAQs)
1. Can a revocable trust be converted into a Medicaid Asset Protection Trust?
No. A revocable trust cannot be converted into a MAPT. Revocable trusts allow the grantor full access to assets, making them countable for Medicaid eligibility. To gain the protections of a MAPT, you must create a new irrevocable trust that follows specific Medicaid compliance rules.
2. Why can't I be the trustee of my own MAPT?
If you serve as the trustee of your MAPT, Medicaid will likely argue that you still control the assets. This defeats the purpose of asset protection. By appointing someone else-such as a child or trusted individual-you demonstrate that the assets are no longer available to you for Medicaid eligibility purposes.
3. What happens to the assets in a MAPT after I die?
The assets in your MAPT pass directly to your named beneficiaries, typically your children or heirs, without going through probate. Additionally, because the assets were removed from your personal ownership, they are protected from Medicaid estate recovery efforts.
4. How is a MAPT taxed?
Most MAPTs are designed as grantor trusts for tax purposes. That means income generated by the trust is reported on your personal tax return. Upon your death, assets in the trust typically receive a step-up in basis, minimizing capital gains taxes for your heirs if they later sell those assets.
5. Can other types of trusts protect assets from Medicaid?
Some types of irrevocable trusts may offer partial protection, but only properly structured MAPTs are optimized for Medicaid planning. Trusts like special needs trusts or charitable trusts serve different purposes and do not shield your own assets from long-term care costs in the same way.