Medicaid Asset Protection Trust in Florida

A Medicaid asset protection trust is an irrevocable trust designed to remove assets from a Florida resident’s countable resources for Medicaid eligibility purposes. The trust must be funded at least five years before the Medicaid application to avoid the federal look-back penalty. While the primary purpose of a MAPT is Medicaid qualification, the trust’s irrevocable structure also creates creditor protection consequences that overlap with, but differ from, trusts designed specifically for asset protection.

How a MAPT Works

The grantor creates an irrevocable trust and transfers assets into it. Neither the grantor nor the grantor’s spouse may serve as trustee, and neither may be a beneficiary of the trust principal. The grantor may retain an income interest, meaning the trust can distribute investment income to the grantor during their lifetime. The trust names other individuals, typically the grantor’s children, as beneficiaries of the trust principal.

Once the assets are inside the trust, Medicaid does not count them toward the applicant’s resource limit. Florida Medicaid generally limits countable assets to $2,000 for an individual applicant. Assets transferred to a properly structured MAPT more than five years before the application are excluded from this calculation entirely.

The five-year look-back period is the central timing constraint. Medicaid reviews all asset transfers made within the five years preceding the application. Transfers during the look-back period create a penalty period during which the applicant is ineligible for Medicaid benefits. The penalty length is calculated by dividing the transferred amount by the average monthly cost of nursing home care in Florida.

The Self-Settled Trust Problem

A MAPT is a self-settled trust in one specific sense: the grantor creates and funds it. Florida Statutes § 736.0505(1)(b) provides that creditors of a trust’s settlor can reach the maximum amount distributable to the settlor from a self-settled trust. How this statute applies to a MAPT depends on what the grantor retains.

If the grantor retains an income interest, the grantor’s creditors can reach that income stream. The trust principal, to which the grantor has no access, is not reachable by the grantor’s creditors because the grantor holds no beneficial interest in the principal. The grantor cannot demand principal distributions, and no creditor can compel what the grantor cannot demand.

If the trust is structured so the grantor retains no beneficial interest at all (neither income nor principal), § 736.0505 does not apply because the grantor is not a beneficiary. The trust then functions as a pure third-party trust for creditor protection purposes, with the children or other named individuals as the sole beneficiaries. The trade-off is that the grantor receives no income from the trust during their lifetime.

The distinction between retaining an income interest and retaining no interest determines whether the MAPT provides any creditor protection for the grantor personally. For Medicaid purposes alone, retaining an income interest does not disqualify the trust. For creditor protection purposes, retaining an income interest creates exposure.

MAPT vs. Creditor Protection Trust

A trust designed specifically for asset protection and a trust designed for Medicaid qualification share the same foundational structure (irrevocable, third-party beneficiaries, no grantor access to principal) but differ in several important ways.

Feature	MAPT	Creditor Protection Trust
Primary goal	Medicaid eligibility	Shield assets from civil creditors
Grantor as beneficiary of income	Often yes	Typically no (self-settled problem)
Spendthrift provision	Sometimes included	Always included
Discretionary distributions	Varies	Standard for maximum protection
Timing constraint	Five-year look-back	Fraudulent transfer statute of limitations
Trustee location	Domestic (Florida or other state)	Domestic or offshore

A MAPT that includes a spendthrift provision and discretionary distribution authority provides creditor protection for the trust beneficiaries (the children) under §§ 736.0502 and 736.0504(2). A creditor of a child who is a beneficiary of a properly drafted MAPT cannot compel the trustee to distribute trust assets and cannot attach the child’s trust interest.

The grantor’s creditor protection from a MAPT is weaker. If the grantor retains an income interest, creditors can reach that income. If the grantor retains no interest, the grantor receives no benefit from the trust during their lifetime. A trust designed primarily for creditor protection typically uses a different structure, such as a spousal limited access trust where the grantor’s spouse is the primary beneficiary and the grantor benefits indirectly through the marital household.

What Assets Go Into a MAPT

Common MAPT assets include the family home, non-retirement investment accounts, bank accounts, and non-homestead real estate. Retirement accounts (IRAs, 401(k)s) are generally not transferred into a MAPT because the transfer triggers income tax on the full account balance, which typically outweighs the Medicaid planning benefit.

The family home receives special treatment. The grantor can transfer the home into the MAPT and retain the right to live in the property during their lifetime. Florida homestead property tax exemptions are preserved if the trust is structured properly. The trust can sell the home and purchase a replacement property without restarting the five-year look-back period, because the initial transfer is the only transfer Medicaid evaluates.

Transferring the home to a MAPT also avoids Medicaid estate recovery. Florida participates in the Medicaid estate recovery program, which seeks reimbursement from a deceased Medicaid recipient’s estate for benefits paid during their lifetime. Property held in a MAPT at the time of death is not part of the grantor’s probate estate and is generally not subject to estate recovery.

The Five-Year Look-Back in Practice

The look-back period applies to all transfers for less than fair market value, including transfers to irrevocable trusts. A transfer made four years and eleven months before the Medicaid application is penalized. A transfer made five years and one day before the application is not.

Planning must begin well before the need for long-term care arises. The average annual cost of nursing home care in Florida exceeds $100,000. A person who delays trust planning until a health crisis occurs may find that the five-year window has not yet closed, leaving the transferred assets subject to penalty.

The penalty calculation is mechanical. If the grantor transfers $300,000 to a MAPT and applies for Medicaid three years later, the $300,000 transfer creates a penalty period. Dividing $300,000 by the average monthly nursing home cost (approximately $10,000 in Florida) produces a 30-month penalty during which Medicaid will not cover nursing home costs. The grantor must pay privately during the penalty period.

Estate Recovery and Creditor Interaction

Medicaid estate recovery and civil creditor claims operate under different legal frameworks but can affect the same assets. Estate recovery targets assets in the deceased recipient’s probate estate. Civil creditors pursue assets through judgment enforcement proceedings during the debtor’s lifetime or through probate claims after death.

A MAPT removes assets from both systems. Assets held in the trust at the grantor’s death are not part of the probate estate (avoiding estate recovery) and are not the grantor’s personal property (avoiding creditor claims against the grantor). The trust beneficiaries receive the assets subject to whatever creditor protections the trust agreement provides for their interests.

If the trust includes spendthrift and discretionary distribution provisions, the beneficiaries’ interests are protected from their own creditors under Florida law. The MAPT thereby serves a dual function: it qualifies the grantor for Medicaid while protecting the trust assets from both estate recovery and the beneficiaries’ future creditors.

Trustee Selection

The grantor and the grantor’s spouse cannot serve as trustee. The trustee holds legal title to the trust assets and controls distributions. If the grantor or spouse served as trustee, Medicaid would treat the trust assets as available resources because the applicant would have control over them.

Adult children commonly serve as trustees of MAPTs. A child who serves as both trustee and beneficiary of a MAPT retains the trust’s creditor protection under § 736.0504(2), which provides that discretionary distribution protection applies whether or not the beneficiary also serves as trustee.

Professional trustees (corporate trust companies, attorneys, CPAs) are appropriate when family dynamics are complex, the trust holds significant assets, or the grantor wants independent administration. Professional trustees charge annual fees, typically 0.5% to 1.5% of trust assets, which adds to the cost of maintaining the trust over its lifetime.

Limitations

A MAPT does not protect the grantor’s personal assets that remain outside the trust. Only assets transferred into the trust receive protection. Assets the grantor retains for living expenses, income, and personal use remain countable for Medicaid and reachable by creditors.

A MAPT cannot be funded after the need for long-term care becomes imminent. Transfers made within the look-back period create penalties that defeat the trust’s purpose. The trust works only for individuals who plan years in advance of needing Medicaid benefits.

The irrevocable nature of the trust means the grantor permanently gives up access to the trust principal. If the grantor’s financial circumstances change and they need access to the transferred assets, the trust cannot be revoked to return them. Some MAPTs include provisions allowing the trust protector to modify certain administrative terms, but the grantor’s exclusion from the principal cannot be reversed without destroying the trust’s Medicaid and creditor protection benefits.