Quick answer: A Medicaid trust (irrevocable Medicaid asset protection trust, or MAPT) is an irrevocable trust that holds assets outside your legal ownership — removing them from Medicaid's asset calculation for long-term care eligibility. The critical rule: Medicaid has a 5-year look-back period, so the trust must be established and funded at least 5 years before you apply for Medicaid benefits. Early planning is essential.
Why Long-Term Care Costs Demand Planning
Nursing home care in Texas averages $70,000–$90,000+ per year. Assisted living facilities run $36,000–$60,000+ annually. Medicare only covers short-term skilled nursing care. Medicaid covers long-term nursing home costs, but requires you to spend down nearly all countable assets first — typically to $2,000 for a single person, with a spousal protected amount (the "community spouse resource allowance") for married couples.
Without planning, a family could exhaust $300,000–$500,000+ in savings on care before Medicaid eligibility kicks in. A Medicaid trust, established at least 5 years in advance, can protect much of that wealth for heirs.
What the Trust Can and Cannot Hold
- Can protect: investment accounts, second homes, rental properties, savings, and other non-exempt countable assets
- Usually not needed for: Texas homestead (exempt up to Medicaid limits during lifetime), vehicle, and certain personal property
- Important: you cannot be the beneficiary of principal distributions from the trust while retaining Medicaid protection — income may flow to you depending on structure, but you lose access to principal
Texas-Specific Considerations
Texas is one of a handful of states with unique Medicaid estate recovery rules. Texas Medicaid can seek reimbursement from a deceased recipient's probate estate for benefits paid. Proper trust planning and beneficiary designation strategies can limit this recovery. Texas also does not impose a gift tax, but Medicaid's 5-year look-back remains a federal rule applicable in all states. Work with an elder law attorney licensed in Texas who specializes in Medicaid planning — the rules are state-specific and change frequently.
Questions About Protecting Your Wealth?
Kyle Ellison is a licensed financial professional in TX, CA, NV, MT, UT, NM helping families protect and pass on what they've built.