Medicaid Asset Protection Trust Attorneys in New York
A Medicaid Asset Protection Trust, often called a MAPT, is an irrevocable trust that holds your home and savings so that, once the Medicaid look-back period has run, those assets no longer count against you when you apply for long-term care coverage. You give up the right to take the principal back. In exchange, the trust can keep paying you the income, let you live in your home for life, and, if properly drafted and funded, pass the remainder to your children outside probate and generally beyond Medicaid estate recovery.
New York law shapes how this trust is built, from the signing formalities to the tax return that accompanies the deed of your house. Milvidskiy Law Group P.C. drafts and funds Medicaid Asset Protection Trusts for clients across New York State from our Tarrytown office and by video and phone. This page explains how the trust works under New York law.
Key Takeaways:
- A New York Medicaid Asset Protection Trust is designed to remove your home and savings from the Medicaid resource calculation once the look-back period has passed, while letting you keep the income and the right to live in your home.
- New York’s Estates, Powers and Trusts Law sets strict signing and funding rules for lifetime trusts; a trust that is signed incorrectly or never funded protects nothing.
- Because you keep an interest in the trust for life, your children generally receive a stepped-up income tax basis at your death, and assets in a properly drafted trust generally pass outside the probate estate that New York Medicaid can reach through estate recovery.
How the Trust Is Structured
Three roles make up a Medicaid Asset Protection Trust. You are the grantor, the person who creates and funds the trust. A trustee holds legal title and manages the assets. Beneficiaries, usually your children, receive what remains when you pass away. In our practice, the grantor does not serve as trustee; we typically recommend an adult child or another trusted person, with named successors.
New York’s Estates, Powers and Trusts Law treats a lifetime trust as irrevocable unless the document expressly says otherwise, and a MAPT is drafted to be irrevocable on its face because Medicaid counts the assets of any trust you can revoke. The statute also sets signing formalities: the trust must be in writing, signed by the grantor and at least one trustee, and either acknowledged before a notary in the same manner as a deed or signed before two witnesses who also sign. We use the notary acknowledgment.
The trust can hold your residence, a second home or rental property, brokerage and bank accounts, and other non-retirement assets. IRAs generally stay outside the trust, because moving them would trigger income tax on the full balance; we address them separately in your New York Medicaid plan.
What You Keep
The trust is designed so that you give up only what Medicaid requires. You can keep:
- The income. Interest, dividends, and rent earned by trust assets can be paid to you for life, which is why this is sometimes called an income-only trust. That income is countable for Medicaid budgeting.
- The right to live in your home. The trust grants you the exclusive right to occupy any residence it holds for life. This right is what generally preserves your property tax exemptions and certain income tax benefits, discussed below.
- The ability to change who inherits. Through a limited power of appointment, you can redirect the remainder among your children or other permitted beneficiaries if circumstances change. You cannot use this power to take the property back for yourself.
- The right to replace the trustee with another independent person, and the ability to move, because the trustee can sell the residence and buy a replacement home inside the trust.
What You Give Up
You give up access to principal. The trustee cannot hand back the money you contributed or pay your bills from principal, and you cannot demand that the trust be dissolved. If the trustee could give you principal, Medicaid would treat everything the trustee could reach as available to you. This is why we do not recommend placing all of your assets in a MAPT; keep enough outside it to live comfortably and handle emergencies.
Irrevocable does not mean frozen. New York law allows the creator of an irrevocable trust to amend or revoke it with the written, notarized consent of every person who has a beneficial interest in it. If your children are the only beneficiaries, all are adults, and everyone agrees, the trust can generally be changed or unwound. Some clients also name a trust protector with defined authority to make administrative or tax-driven amendments.
The Look-Back Period in New York
Transferring assets into a MAPT is a gift for Medicaid purposes. New York applies a 60-month look-back to nursing home Medicaid applications: the local district reviews five years of financial records and imposes a period of ineligibility for uncompensated transfers in that window, calculated by dividing the amount transferred by a regional monthly rate the State publishes each year. Assets transferred more than 60 months before the application are not part of that calculation.
Community Medicaid, which pays for home care and assisted living program services, is different. The Legislature enacted a 30-month look-back for community-based long-term care in 2020, but the statute is expressly subject to federal approval, and as of this writing in September 2026 it has not been implemented. A funded trust can therefore currently support a home care application without waiting out a look-back. Because the law remains on the books, as a matter of practice we draft trusts as if the community look-back will eventually apply. For current limits and regional rates, see Medicaid Planning in New York. If a nursing home stay is already near, we also use gifting and promissory note planning and, for married couples, spousal refusal.
Tax Treatment of a New York Medicaid Trust
Income Tax and Step-Up in Basis
We usually draft the MAPT as a grantor trust, so its income is reported on your personal return and the trust does not pay tax at compressed trust rates. Because you keep the income and the right to live in the home for life, federal law also treats the trust assets as part of your taxable estate when you die. For many New York families that is the point: property included in the estate receives a new income tax basis equal to its fair market value on the date of death, so if your children sell the house after you pass, they pay capital gains tax only on appreciation after that date. An outright gift forfeits that benefit; a properly structured MAPT is designed to preserve it. Whether estate inclusion creates an actual New York or federal estate tax depends on the size of your estate, which we review before funding.
Capital Gains Exclusion on the Sale of Your Home
Federal law lets a homeowner who has owned and used a property as a principal residence for at least two of the last five years exclude a substantial amount of gain on sale. Because a grantor trust is disregarded for income tax purposes and you retain the right to live in the home, that exclusion is generally preserved if the trustee sells during your lifetime.
STAR and Senior Property Tax Exemptions
The New York State Department of Taxation and Finance confirms that a trust beneficiary who conveyed the home to trustees but continues to live in it receives the STAR benefit. Your right of occupancy is what generally preserves this. Local senior exemptions generally follow the same logic, but each assessor has its own paperwork, so we notify the assessor after the deed is recorded.
New York Transfer Tax Filing
With limited exceptions, a deed recorded in New York must be accompanied by a State transfer tax return, Form TP-584, even when no money changes hands. A deed to your trust is a gift, so no transfer tax is ordinarily due, but the return and the Real Property Transfer Report (Form RP-5217) are still filed with the county clerk when the deed is recorded.
Funding the Trust Correctly
A New York lifetime trust is valid only as to the assets actually transferred into it. Listing an asset on a schedule attached to the trust is not a transfer. Real estate must be conveyed by a recorded deed to the trustee, accounts must be retitled in the trustee’s name, and other assets are transferred by written assignment describing them specifically. The look-back clock starts when each asset is transferred, not when the trust is signed, so an account that sits in your name for three years after signing has three fewer years of protection. We prepare and record deeds, coordinate retitling, and provide a funding checklist. See our trust funding services page.
A mortgage does not generally prevent the transfer. Federal law bars a residential lender from calling the loan due when a borrower transfers the home into a lifetime trust in which the borrower remains a beneficiary and keeps the right to occupy the property. For a typical owner-occupied home, your retained right of residence is designed to satisfy that condition. Co-op shares can also be transferred, but the cooperative’s board must consent, and many boards have their own trust rider, fee, and review requirements.
Estate Recovery and Probate
After a Medicaid recipient dies, New York may seek reimbursement for benefits paid from the recipient’s estate. New York’s Social Services Law defines the estate for this purpose as property passing under a will or by intestacy, in other words the probate estate. Assets in a properly drafted MAPT pass to your beneficiaries under the trust’s terms, outside probate, and are therefore generally outside the estate that Medicaid can reach.
Keeping the Trust Compliant
After funding, the trustee should keep trust money separate from personal money, record every income distribution to you, handle annual tax reporting, and never pay your personal expenses from principal. When you apply for Medicaid, the district will ask for the trust document, the deed, and account statements through the look-back period. Our professional trustee services are available for families who prefer an independent trustee. A MAPT works alongside a durable power of attorney with gifting authority, a health care proxy, and a coordinated will; see Elder Law in New York, Estate Planning in New York, Asset Protection in New York, and Living Trusts in New York for how the pieces fit together.
Speak with a New York Medicaid Asset Protection Trust Attorney
The best time to create a Medicaid Asset Protection Trust is before care is needed, while five years is a comfortable horizon. If you are already facing a diagnosis, there may still be options. We serve clients throughout New York State from our Tarrytown office in Westchester County, and by video conference and phone. We help New York clients coordinate an estate plan with property and family interests in other states. When another state’s law or local work is involved, we identify the additional legal assistance needed. Contact us to schedule a consultation. If you live in Westchester County, see our Medicaid Asset Protection Trust in Westchester County page.
We discuss the work involved in trust planning, deeds, funding assistance, and any later Medicaid application. The engagement agreement identifies the services and fees for your matter.
This page is provided for general informational purposes only and does not constitute legal advice. Laws change and figures are adjusted periodically. For advice about your situation, consult a qualified attorney.
Frequently Asked Questions
Who should serve as trustee of my New York Medicaid Asset Protection Trust?
In our practice, the grantor does not serve as trustee. Many clients name an adult child or another trusted person, with at least one successor named in the document. The trust can also give you the right to remove a trustee and appoint another independent person, and a professional trustee is an option when no family member is suitable.
Can the trustee sell my house after it is in the trust?
Yes. The trustee can sell the home and either buy a replacement residence inside the trust or hold and invest the proceeds so that the income is paid to you. Because the trust is a grantor trust and you keep the right to live in the home, the federal capital gains exclusion for a principal residence is generally preserved on a sale during your lifetime.
What happens if I need nursing home care before five years have passed?
The transfer to the trust would fall inside New York’s 60-month look-back, and the local district would calculate a penalty period based on the amount transferred. That does not necessarily mean the plan fails. Options include waiting out part of the period, gifting and promissory note planning, and for married couples spousal refusal, and assets in the trust generally remain outside the probate estate that is subject to estate recovery.
Does the trust delay eligibility for home care under community Medicaid?
Not at present. New York enacted a 30-month look-back for community-based long-term care in 2020, but the statute is subject to federal approval and had not been implemented as of September 2026. A funded trust can therefore support a home care application now. Because the law remains on the books, we draft trusts to work if the look-back is later activated.
Will my children owe capital gains tax when they sell the house after I die?
Generally only on appreciation after your death. Because you keep the income and the right to live in the home, the trust assets are included in your taxable estate, and property included in the estate receives a new income tax basis equal to its value on the date of death. Whether inclusion produces an actual New York or federal estate tax depends on the size of your estate.
Can an irrevocable trust be changed after it is signed?
In limited ways. New York law allows the creator of an irrevocable trust to amend or revoke it with the written, notarized consent of everyone who has a beneficial interest in it. The trust itself can also give you a limited power of appointment to change how the remainder is divided among permitted beneficiaries, and some trusts name a trust protector with defined amendment powers.
Does the trust need its own tax identification number and tax return?
It depends on how the trust is drafted and how your accountant prefers to report. Most Medicaid Asset Protection Trusts are grantor trusts, so the income is reported on your personal return even if the trust has its own identification number. We coordinate this with your accountant when the accounts are opened.
Can I put my IRA or 401(k) in the trust?
Usually not. Transferring a traditional retirement account to a trust during your lifetime is generally treated as a full withdrawal and would trigger income tax on the taxable balance. Retirement accounts are handled separately in a New York Medicaid plan, and the trust is generally funded with the home, non-retirement investments, and cash you do not need for daily living.
What must the trustee do each year?
Keep trust assets in accounts titled to the trust, keep them separate from personal funds, record every income distribution paid to you, handle the trust’s annual tax reporting, and never use principal to pay your personal expenses. Good records matter because a Medicaid application will require statements covering the entire look-back period.
Is a Medicaid Asset Protection Trust the same as a living trust?
No. A revocable living trust avoids probate but can be changed or revoked at any time, so Medicaid counts everything in it. A Medicaid Asset Protection Trust is irrevocable and gives up access to principal, which is what allows the assets to be excluded once the look-back has run. Many clients use both for different purposes.
Will I keep my STAR exemption after the deed is recorded?
Generally yes, if you keep the right to live in the home and otherwise qualify. The New York State Department of Taxation and Finance states that a trust beneficiary who conveyed the home to trustees and continues to live there receives the STAR benefit. We notify your local assessor after recording so that STAR and any senior exemption can be carried over to the new ownership.
