The type of living trust you choose determines what assets you can ensure pass on to your family, even if you end up in a skilled nursing facility and need Medicaid to pay for your care. A revocable trust leaves your assets fully exposed, as Medicaid treats them as if you still own them outright. An irrevocable trust, however, can ensure your assets are retained for your family rather than spent on your care. Because New York enforces a five-year look-back period, this trust must be properly drafted and funded well in advance of your application.
At Davies Law Firm, attorneys Frederick P. Davies and William P. Davies help families in Syracuse and throughout Onondaga County plan for long-term care while ensuring what they have worked a lifetime to build can be safely transferred to their families. Our elder trust attorneys in Syracuse guide clients through trust creation, Medicaid eligibility rules, and asset preservation strategies tailored to each family’s situation.
This guide explains how revocable and irrevocable living trusts affect Medicaid eligibility in New York, what the five-year look-back period means for your trust, and how estate recovery can affect your family. You will also learn which asset transfers are exempt from penalties and what steps you can take with an estate planning lawyer to ensure your home and savings remain in your family.
Does a Living Trust Affect Medicaid Eligibility?
Yes, but the impact depends entirely on what type of trust you have. A revocable living trust does not prevent you from having to use those assets to pay for your care before Medicaid kicks in, while a properly structured irrevocable trust can remove assets from your countable estate. This distinction is the foundation of any effective Medicaid plan.
What Is a Living Trust?
A living trust is a legal arrangement you create during your lifetime to hold and manage your assets. You transfer property, such as your home, bank accounts, or investments, into the trust, and a trustee manages those assets according to the terms you set.
There are two main types of living trusts. A revocable trust allows you to change the terms, add or remove assets, or dissolve the arrangement at any time; however, because you retain full control, the assets remain legally yours. In contrast, an irrevocable trust requires you to give up control once the assets are transferred. You generally cannot modify the terms or reclaim the assets, but this specific loss of control is exactly what creates the potential to qualify for Medicaid while retaining those assets for your beneficiaries.
Under the New York Estates, Powers and Trusts Law (EPTL) § 7-1.16, a lifetime trust is presumed irrevocable unless the trust document expressly states that it is revocable. However, for Medicaid planning purposes, simply relying on this default state law is not enough. Your trust document must be meticulously drafted with specific language to ensure Medicaid recognizes it as a qualifying asset preservation trust that completely removes your access to the principal.
Revocable vs. Irrevocable Trust: Which Helps You Retain Assets?
Because the degree of control you retain dictates whether your life savings are exposed to Medicaid, making the right choice is a vital part of estate planning. Reviewing how each trust functions under Medicaid rules can clarify which option aligns with your goals:
| Feature | Revocable Living Trust | Irrevocable Living Trust |
|---|---|---|
| Grantor retains control | Yes | No |
| Can be modified or revoked | Yes | Generally no |
| Medicaid counts assets | Yes, fully countable | No, if properly structured |
| Avoids probate | Yes | Yes |
| Subject to 5-year look-back | Not applicable, always countable | Yes |
| Preserves assets from estate recovery | No | May preserve assets for beneficiaries |
| Useful for Medicaid planning | No | Yes, when properly drafted |
What Does Medicaid Count as an Asset?
New York Medicaid counts most financial resources when determining eligibility for long-term care benefits. Under New York Social Services Law § 366, countable assets include bank accounts, investments, retirement accounts in certain cases, and real estate.
Because many individuals use trusts to manage these assets, the structure of that trust matters. It comes down to one question: can you still access the funds? If Medicaid considers trust assets “available” to you, they count against your resource limit. For an individual applying for nursing home Medicaid in New York, the resource limit is $33,038 (as of 2026, with adjustments made annually). Assets in a revocable trust are considered available because you can take them back at any time, while assets in a properly drafted irrevocable trust are not considered available to be used for your care.
What Is New York’s Medicaid Look-Back Period?
New York Medicaid reviews all asset transfers made within five years (60 months) of the date you apply for nursing home coverage. This is called the look-back period. Under 42 U.S.C. § 1396p, any transfer of assets for less than fair market value during this window can trigger a penalty period, a stretch of time when Medicaid will not cover your long-term care.
The look-back period applies directly to irrevocable trust funding. If you transfer your home or savings into an irrevocable trust and then apply for Medicaid within five years, the transfer is treated as a gift. Medicaid calculates a penalty period based on the value of what you transferred, and during that penalty period, you are responsible for covering your own care costs.
For Syracuse families considering Medicaid planning, delays in funding the trust can shorten your effective planning window significantly.
How Is the Medicaid Penalty Period Calculated in New York?
New York calculates the penalty period by dividing the total value of transferred assets by a regional rate. The regional rate represents the average monthly cost of nursing home care in your area, and the New York State Department of Health updates these figures each year.
Here is a simplified example. Suppose you transferred $150,000 to an irrevocable trust and then applied for Medicaid within the look-back window. If the 2026 regional rate for the Central New York area, which is $14,146 per month, is used, the penalty period would be approximately 10.6 months ($150,000 divided by $14,146 equals 10.6). During those 10.6 months, Medicaid would not pay for your nursing home care.
The penalty period does not begin on the date of the transfer. It starts on the date you would otherwise have become eligible for Medicaid, which means the financial impact hits precisely when you need coverage most.
Are Any Transfers Exempt from the Look-Back Rule?
Certain transfers are exempt from the look-back penalty under both federal and New York Medicaid rules. These exceptions can be valuable tools in a comprehensive Medicaid plan:
- Transfers to a spouse: You can transfer any asset to your spouse without triggering a penalty period
- Transfers to a blind or disabled child: Assets transferred to a child who is blind or permanently disabled are exempt from the look-back rule
- Transfers of a home to a caregiver child: If an adult child lived in your home and provided care that delayed your need for nursing home placement for at least two years immediately before your institutionalization, the home transfer is exempt
- Transfers of a home to a sibling with an equity interest: If a sibling co-owns your home and has lived there for at least one year before your institutionalization, the home transfer is exempt
- Transfers to a trust for the sole benefit of a disabled individual under age 65: These transfers are excluded from the penalty calculation
Each exception has specific documentation requirements. Missing a detail, such as proof that a caregiver child lived in the home for the required period, can mean the difference between an approved transfer and a penalty that delays coverage for months.
Elder Law and Estate Planning Attorneys in Syracuse, NY – Davies Law Firm
Frederick P. Davies, Esq.
Frederick P. Davies is the founder and senior attorney of Davies Law Firm, P.C. He is a noted speaker on estate planning, living trusts, long-term care, Medicaid, and taxes.
Frederick P. Davies earned his Bachelor of Arts in political science from the University of Vermont in 1982 and his Juris Doctor from the Syracuse University College of Law in 1985. He is admitted to practice in all New York and Connecticut state courts, as well as the United States Supreme Court, the United States Tax Court, and the Federal District Court for the Northern District of New York.
Frederick P. Davies served as a Judge Advocate in the United States Navy JAG Corps before entering private practice, gaining extensive trial and estate planning experience. He later served in the New York Air National Guard and the United States Air Force Reserve, retiring at the rank of Colonel in 2015. His final military assignment was as an instructor and subject matter professional on estate planning at the Air Force Judge Advocate General’s School. Frederick P. Davies founded Davies Law Firm in 1993 and has delivered over 1,000 seminars on living trusts, estate planning, long-term care, and Medicaid.
William P. Davies, Esq.
William P. Davies is a partner at Davies Law Firm, P.C. He earned his Bachelor of Arts in political science from the College of Saint Rose in 2013, graduated magna cum laude from Albany Law School with his Juris Doctor in 2016, and earned a Heckerling LL.M. in estate planning from the University of Miami Law School in 2017. William P. Davies is admitted to practice in all state courts of New York and Florida.
William P. Davies received a full academic scholarship to attend Albany Law School and served as a member of the Albany Law Review. He interned for the Honorable Mae A. D’Agostino, Federal District Court Judge for the Northern District of New York, and was awarded a Sponsler Fellowship for placing in the top 10% of his class. William P. Davies brings advanced training in estate planning law to every client engagement at the firm.
How Does New York Medicaid Estate Recovery Work?
Even after a Medicaid recipient passes away, the state may seek reimbursement for the benefits it paid. Under New York’s Medicaid estate recovery program, the local Department of Social Services (LDSS) can file claims against the deceased recipient’s estate to recover the cost of long-term care.
Estate recovery applies to assets that pass through probate, meaning assets in the deceased person’s name at the time of death. This includes real property, bank accounts, and other financial assets that were not held in a trust or transferred before death. If your home was still in your name or in a revocable trust when you died, it could be subject to a recovery claim.
Assets held in a properly funded irrevocable trust generally avoid estate recovery because they are not part of the probate estate. The trust, not you, owns those assets, so they bypass probate and are not reachable by the state’s claim. This is one of the key advantages of irrevocable trust planning beyond Medicaid eligibility itself.
However, preservation from estate recovery is not automatic. If the trust was not properly drafted, or if assets were never formally transferred into the trust, the state may argue that those assets should be included in the recoverable estate. Proper drafting and complete funding are both essential to successfully exempting these assets.
What New York Trusts Work for Medicaid Planning?
A Medicaid Asset Protection Trust (MAPT) is the most effective trust structure for Medicaid planning in New York. While a standard irrevocable trust can remove assets from Medicaid’s count, a MAPT is specifically designed to comply with the state’s look-back, eligibility, and estate recovery requirements.
What Is a Medicaid Asset Protection Trust in New York?
A MAPT is an irrevocable trust designed specifically to remove assets from Medicaid’s countable resources while allowing you to retain certain limited benefits. Unlike a generic irrevocable trust, a MAPT is drafted with Medicaid’s rules at the center of every provision.
In a typical MAPT, you transfer assets such as your home, savings accounts, or investment accounts into the trust. A trustee, usually a trusted family member or professional, manages the trust according to its terms. You give up the right to access the principal, but the trust may allow you to receive income generated by trust assets, such as interest, dividends, or rental income.
Syracuse residents who place a home in a MAPT can often continue living in the property. The trust terms typically grant the grantor a life estate or right of occupancy, so your daily living situation does not change. What changes is legal ownership: the trust, not you, holds title to the home.
What Are the Rules and Limits of a MAPT in New York?
A MAPT must follow strict rules to successfully preserve assets under New York Medicaid law. Failing to comply with any of these requirements can disqualify the trust and leave your assets exposed to nursing home costs.
The grantor cannot serve as trustee. You must appoint someone else, such as an adult child, another family member, or a professional trustee, to manage the trust assets. This ensures Medicaid recognizes that you have genuinely given up control.
The trust must prevent the grantor from accessing the principal. While the trust may distribute income to you, the principal must remain beyond your reach. If the trust language allows you to request or receive principal distributions, Medicaid will treat those assets as available resources and count them against your eligibility.
The MAPT must be funded at least five years before you apply for Medicaid. Signing the trust document alone is not enough: you must actually transfer the assets into the trust. The five-year clock begins on the date the assets are moved, not when the paperwork is completed.
At the grantor’s death, the trust assets pass to the named beneficiaries, typically your children or other family members. Because the assets are owned by the trust and bypass probate, they are generally not subject to Medicaid estate recovery.
Key Takeaway: A Medicaid Asset Protection Trust (MAPT) is a specific type of irrevocable trust designed under New York law to help you retain your home and other assets for your heirs while potentially preserving your right to income from those assets. It must be established and funded at least five years before a Medicaid application to be effective.
Can a Trust Help You Retain Your Home While Qualifying for Medicaid?
Yes. Transferring your home to a properly drafted irrevocable trust, such as a MAPT, ensures it does not have to be sold to pay for care and ensures that the home will not be subject to estate recovery.
Many homeowners use a MAPT to transfer their home while keeping the right to live in the property. The trust grants a life estate or right of use, so you do not need to move out or change your living arrangement. In many cases, you can continue to claim property tax exemptions, including the School Tax Relief (STAR) exemption, as long as the trust terms are structured correctly.
If the transfer occurs within the five-year look-back period, Medicaid will treat it as a disqualifying transfer and calculate a penalty based on the home’s fair market value. For a home worth $250,000, this penalty could delay Medicaid eligibility by a year or more, depending on the regional rate in effect at the time of your application.
Key Takeaway: Placing your home in a revocable living trust does not prevent it from having to be spent on care or being subject to estate recovery. Transferring it to a properly drafted irrevocable trust at least five years before applying for Medicaid helps ensure it can be retained by your family, but the rules are strict, and errors can be costly.
When Should You Set Up a Trust for Medicaid Planning?
The most effective time to create a MAPT is well before you need long-term care, ideally five or more years in advance. Because the look-back period runs from the date of your Medicaid application, every month you wait shortens the benefits the trust can provide.
Many people delay planning because they feel healthy or believe they will not need nursing home care. However, the average annual cost of nursing home care in the Syracuse area is approximately $169,752, and the need for care can arise suddenly after a stroke, fall, or diagnosis of dementia. By the time a health crisis occurs, it is often too late to transfer assets without triggering a penalty.
Starting the process early gives your family time to do it right. Working with a New York living trust attorney to create your MAPT involves drafting the trust, identifying which assets to transfer, updating property deeds, and sometimes restructuring financial accounts. Rushing these steps increases the risk of errors that can undermine the entire plan.
Even if you are currently in your 60s or 70s and in good health, creating a MAPT now gives the five-year clock the maximum time to run. Families who begin planning early have the greatest flexibility and the strongest ability to retain their assets when the need for care eventually arises.
Key Takeaway: The best time to create a Medicaid Asset Protection Trust is well before you need long-term care, ideally five or more years in advance. Waiting until a health crisis occurs limits your options significantly and may result in no asset preservation at all.
Get Help from a Syracuse Elder Law Attorney
Ensuring a lifetime of savings and your family home can be passed to your loved ones while planning for long-term care requires careful legal work. The guidelines for trusts and Medicaid are strict and detailed. Making even one small error when writing the trust or choosing when to act can wipe out years of planning.
At Davies Law Firm, attorneys Frederick P. Davies and William P. Davies have helped Syracuse families plan for long-term care for over 30 years. The firm drafts Medicaid Asset Protection Trusts, restructures property deeds, and advises clients on look-back compliance and estate recovery exposure.
Call Davies Law Firm at (315) 472-6511 to schedule a telephone conference. Our office at 210 E Fayette St in Syracuse serves families throughout Onondaga County, Cayuga County, and Madison County. We can review your situation, explain your options, and help you determine whether a living trust can help you retain your assets while allowing the government to cover your care under the Medicaid rules.
