As long-term care costs continue to rise across the United States, families are asking harder questions about financial security later in life. One of the most common and important questions is does a trust protect assets from Medicaid? The answer depends on the type of trust, when it is created, and how it is structured. In 2026, Medicaid rules remain strict, detailed, and unforgiving of mistakes, making accurate planning essential for anyone concerned about nursing home or long-term care expenses.
This article explains how Medicaid evaluates assets, how different trusts are treated, and what strategies actually work under current rules.
Why Medicaid Planning Matters More Than Ever
Medicaid is the primary payer for long-term nursing home care in the United States. While Medicare covers short-term rehabilitation and medical treatment, it does not pay for extended custodial care. That responsibility often falls on Medicaid once a person meets strict financial requirements.
In many states, the average annual cost of a nursing home now exceeds six figures. Without advance planning, families are often forced to drain savings, sell property, or give up financial independence just to qualify for care.
That reality is why trusts have become a central topic in Medicaid planning conversations.
How Medicaid Defines Countable Assets
Medicaid distinguishes between countable and non-countable assets.
Countable assets typically include:
- Cash and bank accounts
- Investment accounts
- Second homes or vacation properties
- Non-exempt real estate
- Certificates of deposit
Non-countable assets often include:
- A primary residence (within equity limits)
- One vehicle
- Personal belongings
- Certain prepaid burial arrangements
For most single applicants, countable assets must be reduced to a very low threshold to qualify for Medicaid long-term care benefits. Married couples are subject to different rules designed to protect the spouse who remains at home.
The Five-Year Look-Back Rule Explained
Medicaid reviews financial activity during the five years before an application is submitted. This review is known as the look-back period.
During this time, Medicaid examines:
- Gifts
- Asset transfers
- Trust funding
- Property transfers
If Medicaid finds assets were transferred for less than fair market value, it imposes a penalty period. During this penalty period, Medicaid will not pay for care, even if the applicant otherwise qualifies.
This rule directly impacts whether a trust can protect assets.
What a Trust Actually Does
A trust is a legal arrangement where assets are transferred to a trustee to be managed for beneficiaries. Trusts are widely used in estate planning, but not all trusts are treated the same under Medicaid rules.
The two main categories are revocable trusts and irrevocable trusts.
Revocable Trusts and Medicaid
A revocable trust allows the creator to change, modify, or cancel the trust at any time.
From a Medicaid standpoint:
- Assets in a revocable trust are still considered owned by the individual.
- Medicaid counts these assets as available resources.
- Funding a revocable trust does not reduce Medicaid asset totals.
In some situations, placing assets into a revocable trust may even complicate Medicaid eligibility rather than help it.
Irrevocable Trusts and Medicaid
An irrevocable trust cannot be changed or revoked once it is created.
Because the person creating the trust gives up ownership and control:
- Assets placed in a properly structured irrevocable trust may not be counted by Medicaid.
- The trust must be created and funded outside the five-year look-back period.
- The trust must restrict access to the principal.
This distinction is critical when asking whether a trust truly protects assets from Medicaid.
Medicaid Asset Protection Trusts
A Medicaid Asset Protection Trust, often called a MAPT, is a specific type of irrevocable trust designed to comply with Medicaid rules.
How It Works
- Assets are transferred into the trust.
- The person creating the trust no longer owns those assets.
- Income generated by the trust may still be allowed, depending on structure.
- The trust is managed by a trustee, not the original owner.
When done correctly and early enough, this type of trust can remove assets from Medicaid’s countable resource calculation.
Timing Is Everything
One of the biggest mistakes families make is waiting too long.
If assets are placed into a trust within five years of applying for Medicaid:
- A penalty period is triggered.
- Medicaid coverage is delayed.
- Out-of-pocket care costs can become overwhelming.
This is why early planning is essential. Trusts are not emergency tools; they are long-term planning strategies.
What Assets Can Be Placed in a Trust
Common assets transferred into Medicaid planning trusts include:
- A primary residence
- Investment properties
- Savings and non-retirement accounts
- Certificates of deposit
Certain assets require careful handling:
- Retirement accounts often carry tax consequences.
- Cash transfers must be structured correctly.
- Business interests may require valuation and legal review.
What Assets Usually Should Not Go Into a Trust
Some assets are already protected under Medicaid rules and may not need to be placed into a trust at all. In other cases, transferring them can backfire.
Examples include:
- A primary home that already qualifies as exempt
- Assets needed for immediate living expenses
- Accounts that trigger large tax liabilities when moved
Every situation is different, which is why trust planning should never be one-size-fits-all.
Common Myths About Trusts and Medicaid
Many misconceptions lead families into costly mistakes.
Myth 1: Any trust protects assets from Medicaid
Only specific irrevocable trusts can do this.
Myth 2: You can move assets into a trust right before applying
Transfers during the look-back period can cause penalties.
Myth 3: A trust guarantees Medicaid approval
Eligibility depends on income, assets, and timing.
Myth 4: Giving assets to family is safer than using a trust
Direct gifts are also subject to penalties.
State Rules Still Matter
While Medicaid is a federal program, states administer it. This means:
- Asset exemptions vary
- Income limits differ
- Trust interpretations can change by state
What works in one state may not work the same way in another.
So, Does a Trust Protect Assets From Medicaid in 2026?
The answer is yes — but only under the right conditions. A properly drafted irrevocable trust, created well before care is needed, can legally protect assets while allowing Medicaid eligibility later. A revocable trust cannot do this, and late planning often leads to penalties instead of protection.
Understanding how Medicaid views ownership, control, and timing is the difference between preserving assets and losing them to long-term care costs.
Have questions or thoughts about Medicaid planning and trusts? Join the conversation below and stay informed as rules continue to evolve.