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 the funds for 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, 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.

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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

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

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

Protecting assets in a trust 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 important, particularly for lower and middle-class families who might face severe financial hardship due to long-term care costs.

For example, 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.

Medicaid Estate Recovery and Trust Assets

Medicaid estate recovery requires states to seek reimbursement for certain benefits paid on behalf of a recipient after death, most commonly for nursing home and home- and community-based care received after age 55. Recovery is generally limited to the deceased person’s estate, but what counts as an “estate” varies by state. In many states, recovery applies only to probate assets, while others use an expanded indication that can include non-probate interests such as jointly owned property or assets passing by beneficiary designation.

Trust ownership changes how estate recovery applies. Assets held in a properly structured irrevocable trust are usually not considered part of the Medicaid recipient’s estate because the individual no longer owns or controls them. As a result, those assets are typically outside the scope of recovery. By contrast, assets held in a revocable trust remain reachable, since Medicaid treats them as still owned by the individual during life and at death.

The family home is often the focal point of recovery. While a primary residence may be exempt during life for eligibility purposes, it can still be subject to recovery after death if it passes through probate. Transferring a home to an irrevocable trust before the look-back period expires may remove it from the probate estate, which can limit exposure to recovery. Timing, deed structure and retained rights, such as a life estate, all affect how the home is treated.

Estate recovery rules interact with broader planning decisions. The use of trusts, beneficiary designations and ownership structures affects not only Medicaid outcomes but also estate administration, taxes and what heirs receive. A trust that limits recovery may also restrict control or flexibility during life. These trade-offs mean Medicaid planning decisions are closely tied to estate planning and should be evaluated in that context rather than in isolation.

Bottom Line

A man signs documents setting up Medicaid asset protection trust.

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 it’s transferred to the trust beyond the range of the five-year look-back period.

That exemption framework helps explain why housing is often treated differently than most other assets under Medicaid rules.

“In most states, primary homes are left out of the calculation of assets for Medicaid eligibility, as long as the home equity falls below a certain level or if there are other family members living there. Other assets, including investment portfolios and bank accounts, tend to have a bigger impact on Medicaid eligibility. Remember, outright gifting or selling assets could trigger the five-year lookback period, so planning with the help of a qualified financial professional is essential,” said Tanza Loudenback, CFP®.

Tanza Loudenback, Certified Financial Planner™ (CFP®), provided the quote used in this article. Please note that Tanza is not a participant in SmartAsset AMP, is not an employee of SmartAsset and has been compensated. The opinion voiced in the quote is for general information only and is not intended to provide specific advice or recommendations.

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.