Introduction

There are many types of financial trusts, and some of them can help seniors qualify for Medicaid long-term care, like a Medicaid Asset Protection Trust or an Irrevocable Funeral Trust. However, most trusts will count toward the asset limit for eligibility, even if the trust funds are earmarked for someone other than the Medicaid applicant. And creating certain trusts at the wrong time can lead to Medicaid ineligibility.

Trusts that Help Seniors Qualify for Medicaid

Several types of trusts can make a positive impact on Medicaid eligibility, and four of them are detailed below – Medicaid Asset Protection Trusts, Irrevocable Funeral Trusts, Qualified Income Trusts and Special Needs Trusts. These trusts can either help reduce assets or income so applicants can meet Medicaid’s financial eligibility limits. These limits can vary by state and Medicaid program, but seniors can easily determine their eligibility by using our eligibility test.

Medicaid Asset Protection Trusts

Any asset placed in a Medicaid Asset Protection Trust (MAPT) is exempt from Medicaid’s asset limit for eligibility, including a home. If a senior does place their home in a MAPT, they can continue to live in it, and in some cases the home can even be sold and the trust funds can be used to purchase another home. Other assets that can be placed in a MAPT include bank accounts, stocks, bonds, mutual funds, CDs and other real estate holdings. Placing IRAs or 401ks in a MAPT is not recommended due to the tax implications. Assets in a MAPT are also protected from Medicaid Estate Recovery.

The drawback of MAPTs is that creating one violates Medicaid’s Look-Back Period. So, in order for a MAPT to be an effective Medicaid Planning tool, it would have to be created at least 60 months before a senior will need and apply for Medicaid, because the Look-Back Period is 60 months (five years) in most states. This is challenging because it’s hard to know when someone might need Medicaid long-term care, and violating the Look-Back Period will lead to an application being denied and the applicant being penalized with a period of ineligibility.

Please note, the Look-Back Period only applies to Nursing Home Medicaid and Home and Community Based Services (HCBS) Waivers. It does not apply to Aged, Blind and Disabled (ABD) Medicaid, which is also known as regular Medicaid for seniors. Plus, in California, there is no Look-Back Period for HCBS Waivers, and the Look-Back Period is 30 months for Nursing Home Medicaid. And in New York, the 60-month Look-Back Period only applies to Community Medicaid, which is similar to HCBS Waivers in other states.

In order to comply with Medicaid rules, MAPTs must irrevocable, and the trustee (who manages the MAPT) and the trust beneficiary, who will eventually receive the assets in the MAPT, must be different than the trustmaker (the senior who created the trust and will be applying for Medicaid, also known as the grantor or settlor). MAPTs can be expensive to create (between $2,000 and $12,000), so they are only recommended for individuals with $100,000 or more in assets. And creating a MAPT without an attorney or a Medicaid Planning professional is not recommended because the rules governing these trusts tend to change frequently and vary by state.

Irrevocable Funeral Trusts

The funds in an Irrevocable Funeral Trust (IFT) will pay for the funeral and burial expenses of the trustmaker/Medicaid beneficiary. The funds in an IFT are also exempt from Medicaid’s asset limit, although there are caveats and limitations. First, the state must be named as the IFT beneficiary, which means any funds in the trust that are not used for final expenses must be given to the state. Second, there are 22 states that place a limit on the amount of money that can be exempt in an IFT, which ranges from $18,432 to $1,500.

Creating an IFT does not violate the Look-Back Period, which means these trusts can be created and funded at any time in order to help a senior reduce their assets and qualify for Medicaid. Although an attorney is not necessarily needed to create an IFT, we recommend seniors and their representatives consult with a professional before attempting to utilize an IFT for Medicaid purposes.

In order to meet Medicaid standards, IFTs need to be irrevocable, and they need to name the state as beneficiary (in most states), as mentioned above. There are also 25 states (as of June 2025) that require IFTs to have a Goods & Services Agreement. This is an itemized list of all the goods and services, and their approximate cost, the trustmaker wants purchased with the IFT.

Special Needs Trusts

A Special Needs Trust (SNT) can be used by people with disabilities to protect their assets and allow them to qualify for government benefits, including Medicaid. Using an SNT for Medicaid Planning purposes is less common than using Medicaid Asset Protection Trusts or Irrevocable Funeral Trusts, but the right kind of SNT can be useful in the right situation.

There are many types of SNTs, and the type relevant to this article is a First-Party Pooled Special Needs Trust. Any funds placed in this kind of SNT by seniors (age 65+) who are disabled (as determined by the Social Security Administration) will be exempt from Medicaid’s asset limit, but not in every state. Only certain states allow SNTs to be used for this purpose. Plus, even in some states that allow it, creating a First-Party Pooled SNT violates the Look-Back Period, so it would need to be created at least five years in advance (in most states) to be an effective planning tool.

Qualified Income Trusts

While the three trusts described above are relevant to assets, a Qualified Income Trust, as the name implies, involves income. In 25 states, Medicaid applicants who are over their income limit can still qualify by using a Qualified Income Trust (QIT). They do this by placing their excess income in the QIT on a monthly basis until they reach their income limit. After the Medicaid beneficiary passes away, the money in the trust will be given to the state to help cover the cost of care. In the other 25 states, and Washington, D.C., applicants who are over their income limit may be able to qualify using the Medically Needy Pathway, which does not involve any specific trust.

QITs must irrevocable in order to comply with Medicaid rules. The trustmaker can be the Medicaid applicant/beneficiary, or their Power of Attorney, but the QIT also needs a trustee to manage the trust who is someone other than the trustmaker. Using a lawyer is not required when creating a QIT, but consulting with an Elder Law Attorney or Certified Medicaid Planner is recommended. There are no limits to how much income can be deposited into a QIT, but if a senior has enough income to pay for long-term care on their own, that is probably a better option than depositing significant amounts of income into a QIT to qualify for Medicaid.

Trusts that Do Not Help Seniors Qualify for Medicaid

Seniors could have many other types of trust in their portfolios, such as living trusts, charitable trusts or credit shelter trusts, just to name a few. In general, if the senior funded the trust and it’s in their name, its value will likely be counted toward the Medicaid asset limit, unless it’s one of the trusts described above. And if the senior created and funded a trust and put it in someone else’s name, or someone else is named as the trust’s beneficiary, the trust will likely be a Look-Back Period violation if the senior applies for Medicaid within five years of creating it.

To know for certain if a specific trust will count toward the asset limit or violate the Look-Back Period, consult with a professional. Our specialized trust assessment service can help clarify the unknowns when it comes to a trust’s impact on Medicaid eligibility.