Medicaid Asset Protection Trust (MAPT): Income-Only vs Discretionary Structures, 2026

What a MAPT Actually Is

A Medicaid Asset Protection Trust (commonly abbreviated MAPT or sometimes Irrevocable Medicaid Trust) is an irrevocable trust drafted under state trust law and the federal Medicaid framework to make trust assets unavailable to the grantor for Medicaid eligibility purposes. The protection arises from the combination of three statutory and structural features: (1) the trust is irrevocable, (2) the grantor has no right to compel distribution of trust principal, and (3) more than 60 months have passed between funding and any Medicaid long-term-care application.

Under 42 USC §1396p(d)(3)(B), an irrevocable trust is treated as a Medicaid-available resource only to the extent the trustee has any discretion to distribute trust assets to the grantor. If the trust prohibits distributions of principal to the grantor entirely, no portion of the principal is counted. This is the structural foundation of every MAPT.

Income-Only MAPT (Most Common)

An income-only MAPT (sometimes called a Medicaid Income-Only Trust or MIIOT) requires the trustee to distribute all trust net income to the grantor for the grantor's lifetime. The grantor has no right to principal. Because the income interest is mandatory and ascertainable, it provides the grantor with a stream of income during retirement (interest, dividends, rental income) while the principal sits protected.

The income-only structure has two practical advantages. First, it gives the grantor a real cash-flow stream from trust assets, which is essential for a retiree relying on those assets for daily living. Second, the income stream qualifies as Medicaid-countable income at the point of application, which means the grantor uses the trust income to contribute toward care (the share-of-cost calculation), but the underlying principal remains protected. From a household budgeting perspective, the grantor still benefits from the trust assets through income; only the principal is locked.

From a tax perspective, an income-only MAPT is typically structured as a grantor trust under IRC §677 because the grantor retains a beneficial interest. The grantor reports all trust income on a personal Form 1040; the trust files an informational Form 1041 in some configurations. This is generally desirable because it preserves the §1014 step-up in basis at the grantor's death, since the assets are also includible in the grantor's gross estate under §2036.

Fully Discretionary MAPT

A fully discretionary MAPT (sometimes called a Family MAPT or a Children's Trust) gives the trustee complete discretion to distribute trust income and principal among a class of beneficiaries that does not include the grantor. The grantor receives nothing from the trust. From a Medicaid perspective, this is the strongest possible protection because the trust assets and income are both unavailable to the grantor.

The trade-off is that the grantor loses both the principal and the income stream. The grantor must have other resources, typically Social Security, a pension, or assets outside the trust, sufficient to live on. The discretionary MAPT is appropriate for grantors with adequate non-trust income who want to shelter wealth for children, grandchildren, or other beneficiaries while qualifying for Medicaid coverage of long-term care.

Discretionary MAPTs can be structured as grantor trusts (the grantor pays the income tax) or non-grantor trusts (the trust files Form 1041 and pays its own tax at the compressed trust brackets). Grantor-trust status under IRC §674 can be triggered intentionally through powers retained by the grantor or by an independent trust protector. The grantor-trust election is usually preferred because the grantor's individual tax brackets are much wider than the trust brackets (37% top bracket at $626,350 for 2026 individual vs $15,650 for trusts).

Comparison Matrix

What Assets Go Into a MAPT

The most common asset funded into a MAPT is the family home. Real estate transfers via deed (usually a quitclaim or warranty deed transferring the property from the grantor as individual to the grantor or trustee as trustee of the MAPT). For a deeper walkthrough of real estate trust funding, see our funding-a-trust-with-real-estate page.

Other commonly funded assets include non-retirement investment accounts, cash, bank CDs, life insurance cash value (sometimes), and ownership interests in closely-held businesses (where state law and the underlying entity's organizational documents allow). Retirement accounts (401(k), IRA, 403(b)) cannot be funded into a MAPT because the Internal Revenue Code requires retirement accounts to have a natural-person designated beneficiary; transferring a 401(k) or IRA to a trust during the grantor's lifetime is treated as a complete distribution and triggers immediate income tax on the entire balance. See our can-an-ira-be-in-a-trust page for the see-through trust mechanics that govern naming a trust as IRA beneficiary at death (which is different from funding the IRA into the trust during life).

Who Should Be the Trustee

The trustee selection is one of the most consequential decisions in MAPT design. The grantor cannot serve as sole trustee because Medicaid agencies treat grantor-trustee structures as evidence that the grantor retains control over trust assets. Most states treat such trusts as fully countable on this basis. The trustee must be an independent person or institution, typically an adult child (most common), an adult sibling or niece/nephew, or a professional trustee (bank trust department or independent corporate trustee for larger estates).

The grantor may retain certain limited powers without compromising Medicaid protection: the power to remove and replace the trustee with another independent trustee, the power to direct trust investments (a directed-trust structure), and the power to add or remove discretionary beneficiaries (excluding the grantor and the grantor's spouse). These powers preserve a degree of oversight without making the trust assets available to the grantor.

A common structural choice is to name two co-trustees (typically two adult children, or one adult child plus an independent corporate trustee) to provide checks-and-balances on trustee decisions. Co-trustee structures are also useful for handling future situations where one trustee becomes unavailable or refuses to act.

The 60-Month Look-Back Interaction

Funding a MAPT today does not protect the assets if the grantor applies for Medicaid within 60 months. The funded value is added to the look-back calculation and triggers a penalty period under 42 USC §1396p(c)(1)(E). The penalty equals the funded value divided by the state divisor. A $400,000 home funded into a MAPT 24 months before application creates a 50-month penalty period at an $8,000 state divisor.

The lesson is timing. The MAPT must be funded 60+ months (preferably 84+ months for safety margin) before any anticipated long-term-care need. Practitioners commonly advise clients to begin MAPT planning in the 65-70 age range when health is still good and the planning horizon is comfortably wider than the look-back window. For a complete walkthrough of the look-back mechanics, see our 5-year look-back rule page.

Estate Tax Treatment (and the Basis Step-Up Question)

For grantors well below the $15,000,000 federal estate tax exemption (the 2026 OBBBA exemption, doubled to $30M for married couples through portability), estate tax inclusion is a feature, not a problem. Including the MAPT assets in the grantor's gross estate under IRC §2036 triggers the §1014 step-up in basis at the grantor's death. This eliminates any built-in capital gain that the children would inherit and immediately repays itself many times over compared to the cost of carryover basis.

For grantors above the federal estate tax exemption (a small minority of MAPT planning candidates), the analysis shifts. A discretionary MAPT structured to fall outside the grantor's gross estate avoids the 40% federal estate tax on the appreciated value at death but loses the step-up in basis. The carryover basis means the beneficiaries inherit the grantor's original cost basis and pay capital gains tax on the full appreciation upon sale. The estate tax math (40%) versus the capital gains tax math (15-23.8% federal long-term plus state) typically favors estate exclusion for very large estates, but for estates between the exemption threshold and roughly $25M, the basis step-up is often more valuable than the estate tax savings.

Common Drafting Provisions

• Limited power of appointment. The grantor retains a testamentary limited power of appointment, allowing the grantor to change the ultimate beneficiaries (within a defined class such as descendants of grantor's parents) by will. This retains flexibility about ultimate disposition without compromising Medicaid protection.
• Trustee power to substitute assets of equivalent value. The trustee may swap trust assets for assets of equivalent value owned by the grantor. This makes the trust a grantor trust for income tax purposes under IRC §675(4)(C) while preserving the Medicaid-protective structure.
• Trust protector role. An independent trust protector (often a different person from the trustee) can amend the trust to respond to changes in Medicaid law, tax law, or family circumstances. The protector role does not give the grantor any direct control.
• Spendthrift clause. A standard spendthrift clause under UTC §502 prevents beneficiaries from assigning their interests and protects against beneficiary creditors. See our spendthrift trust page for the broader spendthrift framework.
• Designation of successor trustees. A clear succession plan (typically two or three named successor trustees in order) avoids the cost and delay of a court-appointed trustee if the original trustee becomes unable or unwilling to serve.

Cost to Set Up a MAPT

MAPT setup is more expensive than a basic revocable living trust because of the additional complexity: irrevocability requires careful drafting to avoid inadvertent grantor-trust pitfalls or Medicaid traps, asset funding requires careful coordination (real estate deeds, account retitling, beneficiary updates), and tax planning requires coordinating IRC §§2036, 2042, 674, 675, 677, and 1014 across the lifetime and death timelines.

Typical cost ranges (national, attorney-drafted, 2026 estimates from elder law practice surveys; verify locally):

• Simple MAPT for moderate estate (under $1M): $4,000 to $7,500 attorney fee, plus filing fees for any real estate deed recording ($50 to $500 per county).
• Complex MAPT involving multiple real properties or business interests: $7,500 to $15,000+ attorney fee.
• Coordinated estate plan including MAPT, pour-over will, financial power of attorney, healthcare directive: $6,000 to $12,000.
• Ongoing annual administration (Form 1041 prep if non-grantor, annual review): $500 to $2,500.

For the broader cost framework comparing all trust types, see our trust costs 2026 page.

Frequently Asked Questions

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