I often meet families who believe their affairs are in perfect order. A few years ago, a couple from Brooklyn sat in my office, proud they had put their brownstone into a revocable living trust. They thought this single act secured their home for their children, shielding it from the high costs of long-term care. They were mistaken. When the time came to apply for Medicaid, they learned a hard lesson—the trust they created for flexibility offered no protection. The house was a countable asset, fully subject to the Medicaid spend-down.
The Critical Difference: Control
The confusion is understandable. A revocable living trust is a powerful instrument for avoiding the time and expense of Surrogate’s Court. Placing assets into this trust ensures a smooth transition of stewardship to your chosen successor trustee upon your incapacity or death. The assets do not pass through probate, a public process that can take months or years.
But the very feature that makes a revocable trust so flexible is its downfall for Medicaid planning. Because you, the grantor, retain the right to amend, revoke, or reclaim the assets at any time, the law views those assets as if they are still in your pocket. You maintain complete control. For Medicaid eligibility, there is no legal distinction between owning an asset outright and holding it in a trust you can undo at will.
Medicaid has strict asset limits. When you apply, the agency reviews all your “countable” resources. Because you can access the principal of your revocable trust, every dollar inside it—cash, stocks, real estate—is counted. This often forces families into a crisis, requiring them to spend down a lifetime of savings on care before Medicaid will step in.
The Right Tool for Asset Protection: The Irrevocable Trust
The conversation then turns to the instrument designed for this specific purpose: an irrevocable trust, often a Medicaid Asset Protection Trust (MAPT). By making the trust irrevocable, you relinquish control. You can no longer unilaterally dissolve the trust or pull assets back for your own use. That transfer of control is the key.
When you move an asset into a properly structured irrevocable trust, you are making a gift to the trust. This action triggers Medicaid’s five-year look-back period, a rule rooted in New York Social Services Law § 366. This provision allows the state to review all asset transfers made within the 60 months prior to a Medicaid application for nursing home care. If a transfer was made during that window for less than fair market value, it can result in a penalty period, delaying eligibility.
Proactive planning is therefore critical. Creating and funding an irrevocable trust must be done well in advance of needing care. It is a deliberate act of stewardship, setting aside assets for the next generation while planning for the contingencies of your own later years. It is not a last-minute fix.
Is a Revocable Trust Ever the Right Choice?
Absolutely. We use revocable trusts frequently, but for the right reasons. A revocable trust is an excellent primary planning document for:
- Probate Avoidance: This is its greatest strength. It keeps your family out of a potentially lengthy and public court process.
- Incapacity Planning: If you become unable to manage your own affairs, your designated successor trustee can step in immediately to pay bills and manage investments without needing a court-ordered guardianship.
- Privacy: Unlike a will, which becomes a public record when filed with the Surrogate’s Court, a trust agreement is a private document.
The choice between revocable and irrevocable is not about which is “better”—it is about which is appropriate for the goal. If your primary concern is managing assets and avoiding probate, a revocable trust may be sufficient. If your legacy planning includes preparing for the possibility of multi-year, high-cost medical care, then an irrevocable trust becomes a necessary consideration.
My role is to help families understand these distinctions and the real-world consequences of each choice. It’s about building a plan that reflects your intentions, not just for who gets what, but for how your family will weather the challenges life presents.
If you have an existing revocable trust and are now thinking about the future costs of long-term care, the first step is a clear-eyed review. I invite you to schedule a consultation where we can analyze the assets in your trust and discuss whether they align with your family’s generational planning goals.
