Many Texans worry about losing their savings when planning for long-term care. Fortunately, sensible estate planning and Medicaid planning can help you protect your home and nest egg. One strategy to consider is a Medicaid asset protection trust.
This post explains key Medicaid rules, how Medicaid asset protection trusts work, and whether you might need one to keep your assets safe while qualifying for benefits.
Key Medicaid Eligibility Rules in Texas
To get Medicaid in Texas for long-term care, you must meet strict Medicaid eligibility rules. More specifically, you must be a U.S. citizen or qualified immigrant, a Texas resident, and age 65 or older. You must also need a nursing-home level of care to qualify for long-term Medicaid benefits.
Financial rules are especially important. For 2025, a single applicant’s countable assets must be at or below $2,000, and their monthly income at or below about $2,901.
If you’re married, one spouse can qualify while the other stays at home, and the at-home spouse can keep up to 50% of the couple’s assets, up to $157,920. Your primary home and one vehicle are generally exempt, but if neither you nor your spouse lives in your house, the state will count home equity up to about $730,000 toward your assets.
Meeting these standards can be tricky if you have significant savings. Without proper planning, you might have to “spend down” assets on care or gifts to qualify. That’s where a Medicaid asset protection trust in Texas can help.
Look-Back Period and Transfer Penalties
Medicaid has a 60-month “look-back period” for asset transfers in Texas. This means the state will review the five years before your application to look for any gifts or transfers for less than fair market value. Any such transfer can trigger a penalty period of ineligibility for Medicaid long-term care.
The penalty period is calculated by dividing the value of the transferred assets by Texas’s Medicaid penalty divisor. For 2025, Texas uses about $7,339 per month as the divisor. A $73,390 gift, for instance, would trigger a 10-month penalty.
Notably, gifts to a spouse are allowed, as they don’t count as violations. However, other gifts or sales below value in the look-back period could delay your Medicaid benefits.
A Medicaid asset protection trust (MAPT) must be funded before the 60-month look-back period for Medicaid in Texas to avoid penalties. If you transfer assets into a trust less than five years before you apply, Medicaid will treat it as a disqualifying gift.
How Irrevocable Trusts Work for Medicaid Planning
A Medicaid asset protection trust is an irrevocable trust set up during your lifetime to move assets out of your name. Once you transfer property into a MAPT, you no longer own it. Medicaid then ignores those assets when counting your resources. This is how the trust can help you meet Medicaid’s limits without spending your money on care.
Here’s what you need to know about MAPTs.
Revocable vs. Irrevocable Medicaid Trusts
Only irrevocable trusts can work for Medicaid. Revocable trusts (those you can change or cancel) won’t protect assets because Medicaid still considers those assets yours. By contrast, you give up control with an irrevocable trust.
Who Needs a MAPT?
Medicaid asset protection trusts are typically employed by seniors or their spouses whose countable assets exceed the Medicaid limits.
In other words, if you have savings or property above the caps and foresee the need for long-term care, you might benefit from a Medicaid trust. You should explore this option if you want to qualify without literally spending down all your assets.
Assets You Can Transfer
Common examples of assets that can go into a Medicaid trust include your home, investment accounts, stocks or bonds, and cash savings. The trust is managed by a trustee (not you) for the benefit of your heirs. Because you can’t be the sole beneficiary, those assets will go to the trust’s beneficiaries after you’re gone.
In practice, how Medicaid asset protection trusts work is that you sign a trust document that specifically makes it irrevocable. You name someone else (often a child or other relative) as trustee. Then, you retitle your chosen assets in the trust’s name. At that point, you’ve legally given up those assets.
Pros and Cons of Medicaid Trusts
On the plus side, a properly funded MAPT can preserve your wealth. Your home and savings remain intact for your heirs instead of being eaten up by nursing home bills or estate recovery. In fact, assets in a MAPT are exempt from Medicaid estate recovery, meaning the state can’t claim them after you die.
Hopefully, this protection explains how to qualify for Medicaid without spending down all your resources. However, it’s important to note that there are also some downsides.
The main drawback is that you must give up control of the assets forever. Once you fund the trust, you generally can’t take the assets back or change the terms. This inflexibility means you lose direct access to that money, and there are legal costs and rules to follow.
Timing is also critical. A MAPT only helps if set up well before you need Medicaid. If you’re already close to needing care, putting assets in a trust will likely trigger penalties.
Long-Term Care Planning With MAPTs
Using a MAPT can be a central aspect of planning for long-term care, but it’s not the only one.
To benefit from a MAPT, you must plan ahead. Ideally, you should set it up while you’re still healthy and at least five years before you expect to apply for Medicaid. A common mistake is setting up a MAPT too late — remember that any assets transferred within the 60-month look-back count as gifts, delaying eligibility.
You might also need to coordinate with other tools to protect assets; for instance, a qualified income trust (also known as a Miller trust) if your income is too high, or a special annuity to adjust asset levels.
A key goal in care-planning is protecting your spouse’s needs and your family’s inheritance at the same time. For example, you can design the MAPT so the healthy spouse still gets support, and any remaining assets go to your children.
Because the rules can be tricky, it’s wise to seek advice from a professional. A long-term care trust attorney in Texas can help fit a MAPT into your broader plan. Your attorney will know, for instance, how to track the 60-month look-back period and account for Texas-specific rules.
Avoiding Medicaid Estate Recovery in Texas
After someone on Medicaid dies, the state will try to recover what Medicaid paid for their long-term care. This is known as the Medicaid Estate Recovery Program (MERP).
Texas law allows Medicaid to file a claim against the decedent’s probate estate to recoup nursing home, home-care, or similar costs. In practical terms, this means your home, bank accounts, and other personal assets could be on the line after you’re gone as a Medicaid recipient.
Some assets are exempt from estate recovery. For example, life insurance proceeds, retirement accounts, pensions, and annuities will usually pass to your heirs outside probate and won’t be claimed by Medicaid.
Additionally, no estate recovery claim will be made if the deceased is survived by a spouse, a child under 21, or a disabled child. However, anything that goes through probate, especially real estate, may be at risk.
To protect your home, consider ways to avoid probate. One common method in Texas is a life estate deed.
With a life estate deed, you can keep living in your home for life and designate who inherits it when you die. A similar tool is a transfer-on-death deed, which also names beneficiaries and only takes effect upon your death. The advantage of these deeds is that they transfer the home outside of probate so Medicaid can’t claim it.
Another possibility lies in the MAPT itself. If your home is properly placed into an irrevocable Medicaid trust, it won’t be part of your probate estate. In simple terms, because the home belongs to the trust’s beneficiaries, the state can’t go after it when you die.
Think ahead about protecting your home from Medicaid recovery. This may involve leveraging a Medicaid asset protection trust, life estate deed, or transfer-on-death deed, possibly in combination. Each option has rules, so it’s best approached with legal help.
Steps to Set Up and Fund a MAPT
If you decide to use a Medicaid asset protection trust in Texas, here are the basic steps you’ll need to follow:
Consult an Attorney
Work with a Texas Medicaid-planning lawyer or an estate planning lawyer for Medicaid in Texas. They can explain the rules, help you decide which assets to protect, and ensure that your timing is optimal.
Draft the Trust Document
Your attorney will prepare the irrevocable trust document. You’ll name the trustmaker (you), the trustee, and the beneficiaries. Remember that the trust must explicitly be irrevocable.
Transfer Assets Into the Trust
Decide which assets to fund. Common choices are your home, bank/investment accounts, and other valuable property. For each asset, you’ll change the title. For example, you might sign a deed that conveys your house into the trust’s name or hands off bank account ownership to the trust. At this point, the assets legally belong to the trust.
Document Everything
If you transfer real estate, record the new deed with the county. Keep detailed records of all transfers to ensure that there’s proof the trust was funded outside the look-back window.
Manage Your Remaining Income Wisely
You can still draw income from trust assets. For example, the trust might pay rent or dividends to you. This income can count toward Medicaid’s income limit, though, so plan accordingly.
Update Your Estate Plan
After creating the MAPT, make a point of reviewing your will, powers of attorney, and other estate planning documents to confirm that they align with the trust plan. For instance, your will might disclaim any assets now held in the trust.
Consider Complementary Strategies
You can also use life estate deeds, annuities, or qualified income trusts as part of your plan. A Texas Medicaid planning lawyer can help you keep track of all the moving parts to ensure that your plan works as intended.
When utilized correctly, establishing a MAPT can be a useful strategy that allows you to qualify for Medicaid without giving away your life’s savings.
Act Now to Protect Your Assets
Your family’s future is too precious to leave to chance. If you have significant assets and think you may need Medicaid coverage for long-term care, the attorneys at Hunter Sargent, PLLC, can offer dependable guidance.
Our team includes experienced estate planning attorneys and Texas Medicaid planning lawyers who understand the key rules intimately. We can explain who needs a Medicaid trust and help you set one up properly if it’s a good option for your situation. Schedule a consultation today to learn more.