State Rules Matter: Why Medicaid Planning is Not One-Size-Fits-All

When it comes to planning for long-term care, many people are surprised to learn that Medicaid—while a federal program—can look very different from state to state. This difference can have a big impact on how your Medicaid Asset Protection Trust (MAPT) works and whether it achieves the goal of protecting your hard-earned assets.

Medicaid is funded in part by the federal government, which sets out baseline rules and regulations. But each state administers its own Medicaid program and has some leeway in interpreting and applying those federal rules—so long as the state’s approach is not more restrictive than the federal guidelines allow. That means your neighbor across state lines might be dealing with very different Medicaid planning rules than you are.

For example, some states treat certain types of retirement accounts, like IRAs, as “countable” resources that could affect eligibility. Others treat them as exempt. Some states allow the use of promissory notes or Medicaid-compliant annuities as planning strategies; others may restrict or disallow these tools entirely. Even spousal protections, like how much income or assets a healthy spouse can keep when the other spouse applies for Medicaid, vary widely.

When using a MAPT to protect your assets, understanding these state differences is critical. A well-drafted MAPT in one state might inadvertently disqualify you from Medicaid benefits in another. For instance:

• Trustee Provisions: Some states are stricter about who can serve as trustee, especially when the grantor retains any control or oversight over trust decisions.

• Income and Principal Rights: States differ in how they treat income rights in a trust. What’s safe in one state might count against Medicaid eligibility in another.

• Homestead Exemptions: Rules about your home—and whether you can continue living there while it’s held in a trust—can vary significantly. Some states let you retain a right to use your home in a trust, while others may view that as an available resource that could disqualify you.

The bottom line is this: Medicaid planning is not a one-size-fits-all solution. A trust or strategy that works in one state may not work in another—and could even make things worse if not tailored to local laws. That’s why it’s so important to work with a professional who understands both federal Medicaid rules and your state’s specific approach to Medicaid eligibility.

Though Congress is currently debating significant cuts to Medicaid programs, one thing will remain certain: The cost of long-term care is going to rise, and more people are going to need it. If the federal government cuts substantial funding, each state will be left to fill in the gaps. Understanding how you can protect your hard earned assets will create peace of mind when you might need skilled care, whether in your home or at a skilled nursing care facility. 

If you’re thinking about using a Medicaid Asset Protection Trust—or any other Medicaid planning strategy—reach out to an estate planning attorney familiar with your state’s rules. They can help ensure your plan is built to succeed where you live, giving you and your family peace of mind.