When you apply for Medicaid, the application asks if you have transferred or given away any assets in the past 5 years. If you answer yes, you will have a transfer penalty, meaning Medicaid will not pay for your care for a period of time based on the value of the assets you transferred. In 2026, for every $11,122 you have given away in the 5 years before you apply for Medicaid, Medicaid will not pay for your care for one month.
Lawyers created the Medicaid Asset Protection Trust as a way for people to transfer their assets to an irrevocable trust more than 5 years before they expect to need Medicaid-covered care. That way the assets are not theirs at the time of application, and they have not transferred anything in the 5 years before they apply.
A Medicaid Asset Protection Trust is a trust where you transfer excess assets that would prevent you from qualifying for Medicaid in the future and name a Trustee to manage those assets for you. Since you will no longer have ownership or control of the assets in the trust, they will not count against you when you apply for Medicaid.