I still remember the day Mrs. Chen walked into our Brooklyn office with a folder full of documents and a worried expression that's all too familiar to us. "I set up a revocable trust five years ago," she said, "and my estate planning attorney told me my home would be protected. Now I'm facing potential nursing home care, and someone just told me Medicaid might still count my house. Was I wrong to trust my plan?"
Unfortunately, Mrs. Chen's confusion reflects one of the most widespread misconceptions in estate planning. The short answer? No, a revocable trust does NOT protect your home from Medicaid. But understanding why—and what actually does work—can save your family's hard-earned assets and provide genuine peace of mind.
Understanding Revocable Trusts: What They Do (and Don't Do)
A revocable trust, often called a living trust, is a valuable estate planning tool that many families use. It allows you to maintain complete control over your assets during your lifetime while avoiding probate after you pass away. You can modify it, dissolve it, or change beneficiaries whenever you want—that's the "revocable" part.
Here's the catch: because you retain full control over the assets in a revocable trust, Medicaid considers them to be yours for eligibility purposes. Think of it this way—if you can access those assets whenever you want, why shouldn't Medicaid count them when determining if you qualify for benefits?
In New York, where Alatsas Law Firm serves families throughout Brooklyn, Queens, and Staten Island, this is particularly important. With nursing home care costs averaging $15,000 to $20,000 per month in our area, the financial stakes couldn't be higher.
Why Medicaid Counts Assets in Your Revocable Trust
Medicaid uses what's called the "available resource" test. If you can legally access an asset, change its ownership, or benefit from it, Medicaid considers it an available resource. With a revocable trust, you typically serve as:
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The grantor (the person who created it)
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The trustee (the person who controls it)
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The beneficiary (the person who benefits from it)
Since you wear all three hats, you have complete dominion over those assets. Medicaid's position is straightforward: if it's yours to control, it's yours to spend on your care before qualifying for benefits.
This also means that after your death, if you received Medicaid benefits, New York State can pursue estate recovery against assets remaining in your revocable trust. Your family could lose the home you worked so hard to protect.
What Actually Works: Irrevocable Trusts for Medicaid Protection
The solution isn't giving up on trust-based planning—it's using the right kind of trust. An irrevocable Medicaid Asset Protection Trust (MAPT) is specifically designed to shield assets from Medicaid's reach while still allowing you to receive income from those assets.
Here's how it works differently:
With an irrevocable trust, you transfer ownership of your home (or other assets) into the trust and permanently give up control. You can no longer change the terms, sell the property without trustee approval, or reclaim the assets. In exchange for this sacrifice, the assets are no longer considered yours for Medicaid purposes.
However—and this is critical—there's a five-year look-back period in New York. This means you must transfer assets into the trust at least five years before applying for Medicaid benefits. Any transfers made within that window can result in a penalty period where you're ineligible for benefits.
The Trade-Offs You Need to Consider
Setting up a Medicaid Asset Protection Trust isn't right for everyone, and it's certainly not a decision to make lightly. At Alatsas Law Firm, we always walk families through both the benefits and limitations:
Benefits:
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True asset protection after the look-back period passes
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You can still live in your home and receive rental income from trust assets
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Protection from Medicaid estate recovery
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Preserves your legacy for children and grandchildren
Limitations:
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You lose direct control over the assets
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The five-year waiting period requires advance planning
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You cannot easily access the principal if circumstances change
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Requires careful drafting by an experienced elder law attorney
I often tell families that a MAPT is like planting a tree—the best time to do it was five years ago, but the second-best time is today. The earlier you plan, the more protection you secure.
Real Planning Requires More Than Just a Trust
While irrevocable trusts are powerful tools, comprehensive Medicaid planning involves multiple strategies working together. Depending on your situation, you might also benefit from:
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Spousal protections that allow a healthy spouse to retain assets
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Proper spend-down strategies if you're within the look-back period
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Converting countable assets into exempt assets (like making home improvements)
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Caregiver agreements that compensate family members for care
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Annuities and other financial products used strategically
Every family's situation is unique. The middle-income families we serve in Brooklyn often face the toughest choices—with enough assets to disqualify for Medicaid but not enough to privately pay for years of long-term care. This is exactly why personalized legal guidance matters so much.
Taking Action: What You Should Do Now
If you're reading this and wondering whether your current estate plan protects you, here are your next steps:
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Review your existing trust documents. If you have a revocable trust and haven't addressed Medicaid planning, you likely have a gap in your protection.
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Consider your timeline. If you're healthy and long-term care needs seem years away, now is the time to establish proper protections. Waiting until a health crisis hits often means it's too late.
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Consult with an elder law attorney. Estate planning and elder law overlap but require different expertise. Look for attorneys who focus specifically on Medicaid planning and understand New York's rules.
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Don't go it alone. The rules are complex, penalties for mistakes are severe, and one-size-fits-all solutions don't work. Your family deserves a plan tailored to your specific needs and goals.
The Peace of Mind You Deserve
Mrs. Chen, the client I mentioned earlier? After reviewing her situation, we were able to implement a comprehensive Medicaid planning strategy that included transferring her home into a properly structured irrevocable trust. While she had to wait through the look-back period, she now has genuine protection and knows her children will inherit the home she and her late husband worked so hard to buy.
The relief on her face during our last meeting reminded me why this work matters. No one should spend decades building a secure life for their family only to watch it disappear to pay for care—especially when proper planning could have preserved it.
Your home represents more than just financial value. It's where you've raised your family, celebrated milestones, and built memories. Protecting it requires the right tools, not just any tools. A revocable trust has its place in estate planning, but when it comes to Medicaid protection, you need something stronger.
If you're concerned about protecting your home and other assets from the high costs of long-term care, don't wait until it's too late. Reach out to an elder law attorney who can assess your unique situation and create a plan that actually works. Your family's future is worth that conversation.
