Plan Ahead. Save Thousands.

A Medicaid Asset Protection Trust (MAPT) is an irrevocable trust designed specifically for Medicaid planning. Assets transferred into the trust are no longer considered yours for Medicaid purposes — but only after the 5-year look-back period has passed.

How it works: You create the trust, name a trustee (usually an adult child or trusted family member), and transfer assets into it. The trustee manages the assets according to the trust terms. You cannot be a trustee of your own irrevocable trust.

What can go in the trust: Your home, bank accounts, investments, life insurance policies, and other assets. The trust can be designed so you continue to live in the home and receive income from the trust during your lifetime.

Cost: Typically $2,000-$5,000 to set up with an elder law attorney. This is a one-time cost that can protect hundreds of thousands of dollars in assets.

The critical rule: Assets must be in the trust for at least 5 years (60 months) before you apply for Medicaid. This is why early planning is so important.

You can give money or assets to family members as part of your planning strategy. The federal gift tax exclusion allows you to give up to $18,000 per person, per recipient, per year (2025) without any gift tax implications.

For example, a married couple could give $36,000 per year to each child, or $72,000 per year to two children, without gift tax concerns.

However, for Medicaid purposes, any gift made within the 5-year look-back period will be treated as a transfer for less than fair market value, which triggers a penalty period. The penalty is calculated by dividing the gift amount by the average monthly nursing home cost.

Documentation is critical: Keep records of every gift — date, amount, recipient, and reason. Save bank statements showing the transfers. This documentation protects both you and the recipients.

Timing matters: Gifts made more than 5 years before a Medicaid application are completely safe. Gifts made within the 5-year window will be scrutinized and may cause a penalty period during which Medicaid will not pay for care.

This is the most straightforward and lowest-risk strategy. Medicaid only counts certain assets. By spending countable assets (cash, investments) on exempt items, you reduce your countable total without any look-back concerns.

Home improvements and repairs: New roof, HVAC system, plumbing, electrical work, accessibility modifications (ramps, grab bars, walk-in tubs, widened doorways). These increase the value of your exempt home.

Prepaid funeral and burial: An irrevocable prepaid funeral plan is completely exempt from Medicaid, regardless of cost. This can cover the funeral service, casket, burial plot, headstone, and related expenses.

Vehicle: One vehicle is exempt regardless of value. If you have an older car, you can purchase a newer, more reliable vehicle. This is a legitimate use of funds.

Pay off debts: Paying off your mortgage, credit card balances, medical bills, and other debts is a perfectly legitimate way to reduce countable assets. You are not giving anything away — you are paying what you owe.

Household furnishings and personal items: Furniture, appliances, clothing, and personal effects are exempt. If you need new appliances or furnishings, this is a good use of funds.

If a family member is providing care — driving to appointments, preparing meals, helping with personal care, managing medications — you can pay them for those services. This is a legitimate expense, not a gift, as long as it is structured properly.

Requirements for a valid caregiver agreement: It must be a written contract signed by both parties. It must specify the services to be provided. The payment rate must be reasonable — fair market value for the services in your area. The services must be documented (a log of dates, times, and tasks performed).

Fair market value in Tennessee: Home health aides typically earn $12-$18 per hour. Personal care assistants earn $10-$15 per hour. These rates provide a benchmark for what is reasonable.

This strategy converts countable cash into payment for services actually rendered — it is not a gift, it is compensation. Medicaid reviewers will scrutinize these agreements, which is why proper documentation is essential.

The contract should be in place before services begin (not created retroactively). Payment should be made regularly (weekly or monthly), not in a lump sum.

A life estate deed splits property ownership into two parts: the life tenant (you) retains the right to live in and use the home for the rest of your life, while the remainder interest passes to another person (usually an adult child) upon your death.

Benefits: The home avoids probate and estate recovery (in most cases). You maintain the right to live there. Property taxes and homestead exemptions typically continue to apply.

Risks and complications: If the life estate is created within the 5-year look-back period, the value of the remainder interest is treated as a transfer and may trigger a penalty. If you need to sell the home later, both the life tenant and the remainder holder must agree, and the proceeds are split based on actuarial tables.

Tax implications: The person receiving the remainder interest gets a stepped-up basis at your death (similar to inheriting), which can save significantly on capital gains taxes if they sell.

This strategy works best when: You are confident you want to stay in the home, you trust the person receiving the remainder interest, and you set it up well before (5+ years) any Medicaid application.

A Medicaid-compliant annuity converts a countable lump sum of money into a stream of monthly income payments. For Medicaid purposes, the lump sum is no longer a countable asset — instead, the monthly payments are treated as income.

To be Medicaid-compliant, the annuity must be: irrevocable and non-assignable, actuarially sound (the payout period cannot exceed the person's life expectancy), and the State of Tennessee must be named as the remainder beneficiary (to the extent of Medicaid benefits paid) after the community spouse.

This strategy is most commonly used for spousal planning. When one spouse enters a nursing home and the couple has assets above the Community Spouse Resource Allowance, the excess can be placed in a Medicaid-compliant annuity in the community spouse's name, converting it from a countable asset to income for the at-home spouse.

Promissory notes work similarly — a loan is made (typically to a family member) with a promissory note that requires regular repayment. The loan amount is no longer a countable asset; the repayments are income. The note must be actuarially sound and non-cancellable.

These are highly technical strategies with very specific legal requirements. A small error can make the entire arrangement non-compliant, resulting in a Medicaid penalty.