What is Medicaid Asset Protection Trust?

What is Medicaid Asset Protection Trust?

When a trust is properly designed to provide asset protection, the assets transferred to it no longer belong to you. As a result, they are beyond the reach of Medicaid or any other future creditor. For this reason, the trust is often called a “Medicaid Trust.”

As its name suggests, an asset protection trust is designed to protect your assets. But, if designed correctly, this legal tool can serve other purposes as well. Typically, we think of creating an asset protection trust when someone is planning to apply for Medicaid. 

While assets can be transferred to family members or friends, there are often risks and disadvantages to doing so. In addition to the obvious issue of the trustworthiness of the individuals involved, there are risks that cannot be calculated. For example, will any of the individuals incur a debt or liability that exposes the transferred assets to collection by a creditor? Will any of the individuals get divorced, or pre-decease you? Also, low-basis assets (e.g., a house that was purchased many years ago for a price that is much less than its current fair market value) have the same low basis in the hands of the persons to whom they were transferred.

With a trust, upon your death, the same assets can be distributed to the same individuals, but now with a “step up” in basis to fair market value, resulting in your beneficiaries avoiding capital gains tax on the increase in value that accrued during your lifetime.

When a trust is properly designed to provide asset protection, the assets transferred to it no longer belong to you. As a result, they are beyond the reach of Medicaid or any other future creditor.

Medicaid has a 5 year look back period

For this reason, the trust is often called a “Medicaid Trust.” Be aware, however, that transfers to a trust—just like transfers to individuals—are subject to Medicaid’s five-year “look back” period. 

For an elderly person to be eligible for nursing home care, assisted living or in-home care from Medicaid, they must have limited income and assets. To prevent candidates from simply giving away their money to qualify for Medicaid, the federal government implemented the “look-back period”. The look back is a set period of time prior to the individual’s application during which the Medicaid administering agency reviews all the financial transactions that the senior has made. If a transaction is found in violation of the look back period’s rules, the applicant will be assessed a penalty. Penalties come in the form of a period of time that the applicant is made ineligible for Medicaid. Meaning they will not be able to receive care services paid for by Medicaid for a certain number of months.

A Medicaid applicant is penalized if assets (money, homes, cars, artwork, etc.) were gifted, transferred, given away or sold for less than the fair market value. The reason for this penalty period is that these assets could have been used to help cover the cost of long-term care if they had not been gifted or transferred.

When Applying for Medicaid

You must disclose the amount of your assets and when you made the asset transfers. Medicaid can question any transfer within the look-back period. If you didn’t get something of at least equal value in return for a transfer, you’ll be ineligible for Medicaid. The look-back period is 5 years for transfers made after February 8, 2006, the date the DRA went into effect.
Ineligibility Period
Asset transfers during the look-back period trigger the ineligibility period. The length of the ineligibility period is calculated by dividing the amount transferred by the average monthly cost of nursing home care in your area. For example, if you transfer $75,000 and the average cost of nursing care in your area is $3,000 per month, your ineligibility period is 25 months. The period begins to run on the date you apply for Medicaid.

The best-case scenario is for the elderly person to transfer assets and be able to stay out of a nursing home until the look-back period expires. If only it were so simple to follow that plan. These rules can be confusing at best and can affect the type of care you or your loved one receives.

Texas Medicaid Planning Attorneys

Barbara Epstein, Elder Law Attorney


Barbara Epstein, Elder Law Attorney

P.O. Box 49263 | Austin, TX 78765

Elder Law attorney Barbara Epstein serves seniors and their families in the following areas: Medicaid Planning, Medicaid Trusts, Ladybird Deeds, Estate Planning and Advance Directives, Medicaid trusts and Ladybird Deeds. Attorney Epstein can provide seniors and family members with practical legal advice by telephone. Documents delivery by email and U.S. mail. Her background in administrative law and at a legal hotline for the elderly and disabled has given her a unique exposure to Texas administrative agency procedures and services, experience with a broad range of common legal problems. Serving the Austin, Dallas, Georgetown, Houston and San Antonio metro areas.  MORE DETAILS >>

Law Office of Clyde Farrell, Bliss Pak & Greg Johnson Austin TX


Farrell & Pak PLLC

1000 Mo-Pac Cir. | Austin, TX 78746
The services provided by Farrell & Pak routinely include: Legal and financial planning for long-term care; Medicaid planning, applications and appeals; Estate planning for individuals and couples; Special Needs Trusts for family members with disabilities; Power of Attorney Agent and Guardianship advisory; Probate and estate administration; Alternatives to Probate Guardianship and Referrals to related geriatric services. Serving Austin, Bastrop, Bee Cave, Blanco, Boerne, Brenham, Bryan, Buda, Cedar Park, College Station, Creedmoor, Driftwood, Dripping Springs, Elgin, Fayetteville, Fredericksburg, Georgetown, Horseshoe Bay, Hutto, Kyle, Lakeway, Leander, Marble Falls, New Braunfels, Pflugerville, Round Rock, Salado, San Marcos, Sun City, Temple, and Wimberley TX. MORE DETAILS >>

Hegwood Law Group - Elder Law Attorneys - Houston, TX


Hegwood Law Group

950 Gemini Street | Houston, TX 77058

At Hegwood Law Group we provide comprehensive estate planning, elder law, asset protection, probate services and are affiliated with the Wealth Counsel, Elder Counsel, The National Academy of Elder Law Attorneys, The Advisor’s Forum and The College of The State Bar of Texas. We will meet with clients at their homes and care facilities. We believe in providing our clients the absolute best legal representation combined with compassionate advocacy and honest advice. Our ultimate objective is to ensure that the needs and goals of our clients are met both efficiently and effectively. Member, National Academy of Elder Law Attorneys. Serving the areas of Clear Lake, Dickinson, Friendswood, Galveston, Houston, League City, Pearland, Sugar Land, and Texas City TX. MORE DETAILS >>

Ladyman Law Offices for Senior Planning - TX Medicaid Nursing Home Eligibility


Ladyman Law Offices for Senior Planning Services

749 Gateway St. Suite 202 | Abilene, TX 79602

The Ladyman Law Office for Senior Planning Services provides comprehensive financial planning to the aging population of Texas. Our main focus is nursing home Texas Medicaid planning. The Ladyman Law Office for Senior Planning Services is a longtime member in good standing with the Better Business Bureau of Abilene. Tim Ladyman, of the Ladyman Law Office for senior planning services, is a member of the National Academy of Elder Law Attorneys, Inc. YOU DO NOT HAVE TO SPEND ALL OF YOUR MONEY PAYING FOR NURSING HOME COSTS! Let the Ladyman Law Office for Senior Planning Services assist you with your Texas Medicaid Planning or Estate Preservation needs. Serving Abilene, Amarillo, Brownwood, Lubbock and San Angelo, TX. MORE DETAILS >>

Peter G. Milne Texas - East Texas Elder Law Attorney


Peter G. Milne. P.C.

327 W. Houston St. | Tyler, TX 75702

Peter G. Milne, P.C. provides legal services including Durable Power of Attorney, Medical Power of Attorney, Advance Health Care Directive (Living Will), Guardian Designation, Advance Planning for Medicaid Assistance, Restructuring Assets to Aid in Qualification for Medicaid Assistance, Medication Application Assistance, and Veteran’s Aid & Attendance Assistance. Peter G. Milne, P.C. is a member of the Better Business Bureau and 2010-2015 winner of BBB Gold Star Award. Serving the areas of Greenville, Longview, Palestine, Terrell and Tyler, TX. MORE DETAILS >>

The Wood Law Firm Senior Planning Texas Medicaid Nursing Home and Long Term Care


The Wood Law Firm, PLLC Senior Planning Division

451 Guadalupe St #204 – Kerrville, TX 78028

The Senior Planning Division of The Wood Law Firm, PLLC provides estate preservation from Medicaid long-term care spend down. You don’t have to spend your life savings paying nursing home costs. We’ve been helping families with Medicaid Qualification all over the state of Texas since 2009. Our Senior Planning Division provides estate preservation from Medicaid long-term care spend down. The best time to call us is when the person is entering the nursing home. Let us help you qualify for Medicaid before you start private pay with the long-term care facility. Serving families throughout Texas including Corpus Christi, Fort Worth, Houston, Kerrville and San Antonio, TX. MORE DETAILS >>

Thompson & Tiemann Attorneys Elder Law Attorneys, Austin TX


Thompson & Tiemann, LLP

5203 Pony Chase | Austin, TX 78727

Gaye Thompson and A. Lynn Tiemann – Elder Law Attorneys and Counselors at Law. As Elder Law attorneys Thompson and Tiemann strive to provide competent and reliable legal services to seniors and the people who care for them. The focus at Thompson Tiemann is on the legal issues of aging, including Advance Directives, Estate Planning, Wills, Trusts, Powers of Attorney, Probate, Medicare and Medicaid Planning. Through Life Care Planning they help seniors and their families create a safety net of information, services, and necessary legal documents to prepare for and protect themselves on the aging journey. By Appointment Only. Serving Austin, Cedar Park, Georgetown, Round Rock, and San Marcos, TX.  MORE DETAILS >>

Virginia L. Lootens Elder Law Attorney, Houston TX


Virginia L. Lootens Attorney at Law

3100 Richmond Ave. Ste. 316 | Houston, TX 77098

Houston elder law attorney Virginia Lootens assists families in the areas of Medicaid Planning, Miller Trusts, Power of Attorney, Living Wills, Guardianship, Wills, and Probate. Services of the Elder Law Practice of Virginia L. Lootens include; wills & probate, directives, Powers of Attorney, spousal protection, asset protection, and assistance with Medicaid application. Attorney Lootens is a member of the National Academy of Elder Law Attorneys (NAELA) and licensed to practice law before all Texas Courts and the United States Supreme Court. If you’re seeking help with important issues regarding care, security and the protection and preservation of assets, you’ve come to the right place!Serving the areas of Bellaire, Friendswood, Houston, Katy, Sugar Land and The Woodlands, TX. MORE DETAILS >>

Wright Abshire Elder Law and Texas Medicaid Planning Attorneys


Wright Abshire Attorneys

4949 Bissonnet Street | Bellaire, TX 77401

Wright Abshire Attorneys is a Houston-area law firm offering a full range of elder law services to Texas families. We also serve out-of-state families with relatives in Texas. We draft and execute wills, trusts and special needs trusts. We also create advance directives and durable powers of attorney — always with a focus on meeting each client’s specific needs. We know that many families approach Medicaid planning and veterans benefits with unease. Our firm can inform you of your options and equip you with the advice you need to make sound decisions for your loved ones. Serving the zip code areas of 77401, 78932 and 77384 including Bastrop, College Station, Conroe, Deer Park, Fayetteville, Friendswood, Galveston, Houston, Katy, Kingwood, League City, Pasadena, Pearland, Richmond, Rosenberg, Spring, Sugar Land, Texas City and The Woodlands, TX. MORE DETAILS >>



2 thoughts on “What is Medicaid Asset Protection Trust?

  1. If my parents put all their assets in a trust, the total amount is divided by the market amount of nursing home care. Is that correct?

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