Yes, Medicaid can take money from a trust, and how much depends on the type of trust, the language inside it, and when you funded it. A revocable trust gives no protection at all because the government treats everything in it as your own money. An irrevocable trust can shield assets from the eligibility count, but only if the document blocks every route back to you and you funded it more than five years before applying. Even a well-drafted trust can be reached after death through estate recovery, depending on how your state defines an estate.
Revocable Trusts Are Fully Countable
A revocable living trust lets you change the terms, withdraw funds, or dissolve the arrangement at any time. That control is exactly why federal law counts the entire balance as an available resource and treats any payment you receive from it as income.1Office of the Law Revision Counsel. 42 USC 1396p – Liens, Adjustments and Recoveries, and Transfers of Assets From the state’s point of view, money in your revocable trust is no different from money in your checking account.
Most states cap resources for long-term care Medicaid at $2,000 for an individual, though a few use higher thresholds. A revocable trust holding $150,000 counts the full $150,000 against that limit. You would need to spend it down on care or restructure the trust into something that genuinely removes your access before you could qualify.
One further wrinkle: if money leaves a revocable trust and goes to someone other than you, Medicaid treats that payment as a gift, which triggers the same transfer-penalty rules that apply to irrevocable trusts.1Office of the Law Revision Counsel. 42 USC 1396p – Liens, Adjustments and Recoveries, and Transfers of Assets
Irrevocable Trusts Only Work if You Truly Give Up Access
An irrevocable trust removes your ability to change the terms or pull the money back. That loss of control is what creates the potential for protection, but the statute demands more than the label. If there are any circumstances under which payment from the trust could be made to you or for your benefit, the portion of the trust that could reach you still counts as an available resource.1Office of the Law Revision Counsel. 42 USC 1396p – Liens, Adjustments and Recoveries, and Transfers of Assets
This is where many trusts fail. Language giving the trustee discretion to distribute funds “for the health and welfare” of the grantor lets Medicaid argue that payment could come back to you, and count those assets. Only the portion from which no payment could ever reach you, under any reading of the document, is treated as unavailable.
Where a portion of the trust is genuinely beyond your reach, Medicaid treats those assets as having been given away on the date the trust was funded. That sounds like a win, but it feeds directly into the transfer-penalty system.
The Five-Year Look-Back Period
Funding an irrevocable trust is a transfer for less than fair market value, because you gave assets away without receiving equal value in return. Medicaid reviews every transfer made during the 60 months before your application. Gifts or trust transfers inside that window trigger a penalty period during which you cannot receive benefits.1Office of the Law Revision Counsel. 42 USC 1396p – Liens, Adjustments and Recoveries, and Transfers of Assets
The penalty is calculated by dividing the value of the transferred assets by your state’s average monthly cost of nursing home care. Those rates vary widely, from roughly $7,200 per month in some states to over $17,000 in high-cost areas. A $150,000 transfer in a state with a $10,000 monthly rate produces a 15-month disqualification. You pay for your own care during that period.
The math gets harsh for people who wait. If you transfer $300,000 into an irrevocable trust and apply two years later, the entire $300,000 divided by the state rate can produce a penalty stretching well beyond the five-year look-back itself. The penalty clock does not start until you are otherwise eligible and have applied, so you cannot simply wait it out at home. Effective planning means funding the trust at least five full years before you expect to need nursing home care.
Trust Income Still Goes Toward Your Care
Even when the principal of an irrevocable trust is successfully excluded from your resource count, the income it throws off can still affect your benefits. If the trust terms allow interest, dividends, or rental income to be distributed to you, Medicaid counts those payments as your income.1Office of the Law Revision Counsel. 42 USC 1396p – Liens, Adjustments and Recoveries, and Transfers of Assets
In practice, that income is applied to the monthly cost of your care. Medicaid lets nursing home residents keep a small personal needs allowance (the federal floor is $30 per month, and state amounts vary) and, if a spouse is still at home, may divert some income to support that spouse.2Medicaid.gov. Spousal Impoverishment Everything else becomes your patient liability paid to the facility. If your trust produces $1,500 a month in dividends and your state lets you keep $75, the remaining $1,425 goes toward the nursing home bill.
Some families deliberately use an income-only design, keeping the principal locked for heirs while directing generated income to the beneficiary and then to the facility. The wealth stays intact for the next generation while cash flow satisfies Medicaid’s expectation that you contribute what you have.
Special Needs and Pooled Trusts
Federal law carves out narrow exceptions for trusts that benefit people with disabilities. These trusts avoid the usual counting and transfer-penalty rules, but each carries its own conditions.
First-Party Special Needs Trusts
A first-party special needs trust holds the disabled person’s own money, often from an inheritance, lawsuit settlement, or back-pay award. The beneficiary must be under 65 and meet the federal definition of disabled, and the trust must be established by the individual, a parent, grandparent, legal guardian, or a court. The trade-off is at the end: when the beneficiary dies, the state is reimbursed from whatever remains, up to the total Medicaid benefits paid during the person’s lifetime.1Office of the Law Revision Counsel. 42 USC 1396p – Liens, Adjustments and Recoveries, and Transfers of Assets Nothing passes to heirs until Medicaid is made whole.
Third-Party Special Needs Trusts
A third-party special needs trust is funded by someone other than the beneficiary, such as a parent leaving money to a disabled child. Because the money was never the beneficiary’s own asset, no Medicaid payback provision is required. When the beneficiary dies, remaining funds go to whoever the trust names.
Pooled Trusts
Pooled trusts are managed by nonprofit organizations that maintain a separate account for each beneficiary while investing the funds collectively. They are open to disabled individuals of any age, which makes them an option for people over 65 who cannot use a first-party special needs trust. Each account must be established by the individual, a parent, grandparent, legal guardian, or a court.1Office of the Law Revision Counsel. 42 USC 1396p – Liens, Adjustments and Recoveries, and Transfers of Assets At death, the nonprofit may retain funds left in the account, and anything it does not keep must reimburse the state. Some states still impose transfer penalties on individuals over 65 who fund a pooled trust, so state rules matter here.
Estate Recovery After Death
Protecting trust assets during your lifetime is only half the picture. After a Medicaid recipient dies, the state is federally required to seek repayment for nursing facility services, home and community-based services, and related hospital and prescription drug costs paid on behalf of anyone who was 55 or older when they received benefits.1Office of the Law Revision Counsel. 42 USC 1396p – Liens, Adjustments and Recoveries, and Transfers of Assets
How far the state can reach depends on how it defines “estate.” Roughly half of states limit recovery to assets that pass through probate, which generally leaves properly structured irrevocable trusts alone. Roughly two dozen states use an expanded definition reaching beyond probate to include trusts, joint accounts, and other non-probate arrangements.3Medicaid.gov. Estate Recovery In expanded-definition states, assets successfully shielded during your lifetime can still be claimed after your death. Heirs who expected the trust balance may find it reduced or gone.
Recovery cannot begin while certain family members survive. States may not pursue a claim against the estate of someone survived by a spouse, a child under 21, or a blind or disabled child of any age.3Medicaid.gov. Estate Recovery States also must offer hardship waivers, though qualifying is difficult in practice. The state’s claim functions like a creditor’s lien and gets paid before any inheritance is distributed.
Timing and Planning Realities
The rules above leave a narrow path for legitimate asset protection, and it takes years of advance work. An irrevocable trust funded today gives no Medicaid benefit until the five-year look-back closes. If you need nursing home care inside that window, the transfer penalty can leave you without coverage and without the assets you gave away.
Married couples face extra considerations. The community spouse can keep a portion of the couple’s combined assets, with the 2026 protected amount ranging from $32,532 to $162,660 depending on total resources and state rules. Transferring assets the healthy spouse could simply have kept is a common and expensive mistake.
No trust structure makes assets permanently invisible to Medicaid. Revocable trusts are fully countable. Irrevocable trusts work only if they completely cut off your access and survive the look-back. Special needs trusts protect eligibility for disabled beneficiaries but usually require paying the state back after death. Estate recovery can reach anything that falls inside your state’s definition of an estate. Each layer of protection has a matching limit, and the interactions between them are where most planning errors happen.