Medicaid Asset Protection Trusts (MAPTs): Structure, Timing, and Strategic Considerations in New York

For individuals engaging in advance long-term care planning, the Medicaid Asset Protection Trust (MAPT) is one of the most frequently utilized structures. Properly designed and implemented, it allows assets to be repositioned in a manner that can preserve wealth while maintaining eligibility for nursing home Medicaid after the expiration of the five-year look-back period. A MAPT is not a shortcut. It is a formal legal restructuring of ownership that requires careful drafting, disciplined administration, and thoughtful timing.

What a MAPT Is — and What It Is Not

A MAPT is an irrevocable trust established during lifetime. The grantor transfers selected assets—often a residence, investment accounts, or other non-retirement assets—into the trust. Once transferred, those assets are no longer owned outright by the grantor. Because the trust is irrevocable, the transferred property is generally removed from the grantor’s countable resources for Medicaid purposes, provided the transfer occurred more than five years before a Medicaid application.

However, “irrevocable” does not mean the grantor is left without rights. A properly drafted MAPT can allow the grantor to retain certain interests, such as:

• The right to receive income generated by trust assets;

• The right to reside in a primary residence transferred to the trust;

• The ability to change ultimate beneficiaries through a limited power of appointment.

What the grantor cannot retain is direct access to principal. If the grantor can demand principal distributions, the assets will remain countable for Medicaid purposes.

The Role of the Trustee

The trustee of a MAPT must be someone other than the grantor. Often, an adult child or trusted advisor serves in this capacity. The trustee controls principal distributions, manages investments, and administers the trust in accordance with its terms.

Trustee selection is not merely administrative. It carries practical implications for control, family dynamics, and asset management continuity. For high-value estates or complex investment portfolios, professional fiduciary oversight may be appropriate.

Treatment of the Primary Residence

In New York, a primary residence is frequently transferred into a MAPT. When structured properly, the grantor retains the right to occupy the home for life. This preserves stability while removing the property from the taxable estate for Medicaid eligibility purposes after the look-back period expires. From a tax perspective, careful drafting can preserve eligibility for a step-up in basis at death, mitigating capital gains exposure for beneficiaries. This integration of Medicaid planning with income tax strategy is essential for families with highly appreciated real estate.

Income Tax and Basis Considerations

One of the principal advantages of a properly structured MAPT is that it can be drafted as a “grantor trust” for income tax purposes. This allows the grantor to continue reporting income on personal returns, preserving step-up in basis at death under current law.Poorly structured transfers—particularly outright gifts—can eliminate basis step-up and shift capital gains exposure to children. A MAPT allows for asset protection planning without automatically sacrificing tax efficiency.

Timing and the Five-Year Look-Back

Funding a MAPT constitutes a transfer for Medicaid purposes. Therefore, the five-year look-back applies. The trust must be established and funded at least five years before a Medicaid application to avoid penalty exposure. This reinforces the central principle of long-term care planning: early action expands options. Establishing a MAPT in advance of foreseeable health decline provides the greatest structural protection. If care is needed within the look-back window, penalty modeling and liquidity planning become necessary. The trust itself does not eliminate the penalty; it simply starts the clock.

Limitations and Trade-Offs

A MAPT is not appropriate in every case. Considerations include:

• Loss of direct control over principal;

• Inability to revoke or freely amend the trust;

• Administrative responsibilities for trustees;

• Potential complexity if asset liquidity is required during lifetime.

For individuals who require full flexibility over principal, alternative strategies may be preferable. For those with long-term planning horizons and defined wealth preservation objectives, a MAPT can be highly effective.

Integration With Broader Wealth Strategy

Medicaid planning should not operate in isolation from estate tax planning, business succession, or investment management. The assets selected for transfer must be evaluated in light of:

• Estate tax thresholds;

• Capital gains exposure;

• Income needs of the grantor;

• Intergenerational distribution objectives;

• Governance of family business interests.

When structured thoughtfully, a MAPT becomes part of a coordinated wealth preservation framework rather than a reactive eligibility maneuver.

A Strategic Perspective

The purpose of a Medicaid Asset Protection Trust is not to evade care costs. It is to introduce structure and predictability into an otherwise uncertain long-term care landscape. For families seeking to preserve accumulated assets while maintaining compliance with New York Medicaid regulations, the MAPT remains one of the most disciplined planning tools available. The effectiveness of the strategy depends on timing, drafting precision, and integration with broader tax and estate planning goals. When implemented proactively, it can preserve both financial stability and generational continuity.