Medicaid Asset Protection Trust (MAPT)

A **Medicaid Asset Protection Trust (MAPT)** is an irrevocable trust that the grantor funds at least five years before applying for institutional (nursing-home) Medicaid. After the 60-month lookback period runs, the trust principal is **not a countable resource** under 42 U.S.C. § 1396p(c)(1)(B), meaning the grantor can qualify for Medicaid while the trust assets continue to benefit the family.

The trust must be **irrevocable** — the grantor gives up the right to revoke or amend — and the grantor cannot retain principal access. A common structure: grantor keeps a mandatory right to trust income (interest, dividends) but no right to principal; children or other beneficiaries are entitled to principal. Grantor may retain a "limited power of appointment" (the ability to change WHO among the beneficiary class inherits, but not to pull assets back) to preserve a step-up in basis at death under IRC § 1014, which is a huge tax benefit for appreciated assets.

**What goes in**: typically the home (after retaining a right of occupancy), a brokerage account, sometimes income-producing property. What does NOT go in: retirement accounts (IRAs can't be transferred to a trust without triggering income tax; they're counted for Medicaid separately), the homestead while it's still protected by the home-equity exemption, and any asset needed for the grantor's pre-Medicaid living expenses.

**Who should consider a MAPT**: age 55-70, home equity plus non-retirement assets greater than ~$200,000, family history of dementia or long-term-care use, no long-term-care insurance, not comfortable self-funding a $120,000/year nursing home. Below that wealth threshold the applicant qualifies for Medicaid quickly anyway; above ~$1M the planning usually shifts to LTC insurance + self-insure rather than Medicaid.

**Grantor-trust tax status**: a properly drafted MAPT is usually a grantor trust for income-tax purposes (under IRC §§ 671-677), meaning trust income flows to the grantor's 1040 — simpler tax reporting and preserves the IRC § 121 principal-residence exclusion on eventual sale. It remains a non-grantor trust for Medicaid purposes. This dual-status drafting is the single most technical part and where DIY fails.

**Why this is tier-red**: the drafting errors are unfixable after the fact. A MAPT that retains the wrong power (right of revocation, general power of appointment, Medicaid trustee, broad distribution standard that benefits grantor) is fully countable as a resource — worst of both worlds: irrevocable to you, countable to Medicaid. Use an elder-law attorney.

Tagged 🔴 — attorney drafting required. This is foundational HNW-family planning that most middle-class families never learn about. Fornax's role: explain what it is, who should ask about it, when the 5-year clock matters, and what NOT to do.