If you are asking whether an irrevocable trust can protect your home and savings from nursing-home costs in New York, the short answer is yes — but only if you plan early enough to clear the five-year look-back. When you apply for institutional (nursing-home) Medicaid, the agency reviews the prior 60 months of financial records for any uncompensated transfers, including assets moved into an irrevocable trust. Transfers made within that window create a penalty period of Medicaid ineligibility; transfers seasoned beyond it do not count. An irrevocable trust is the central tool for this kind of planning because, unlike a revocable trust, assets placed in it can be excluded from your countable resources — but that protection comes at the cost of control, and it only pays off when the clock has fully run. This article compares the irrevocable trust against the realistic alternatives so you can see where it wins and where it does not.
The Building Block: How New York Trusts Work
New York trusts are governed by the Estates, Powers and Trusts Law (EPTL) Article 7. The single most important distinction for asset protection is revocable versus irrevocable:
- A revocable living trust lets the grantor keep full control and amend or revoke the trust at any time. Its benefits are real but limited to avoiding probate, privacy, and incapacity management. Because you retain control, the assets remain yours — they stay in your taxable estate and stay countable for Medicaid. A revocable trust does not protect against the look-back.
- An irrevocable trust generally cannot be amended or revoked. You give up control, and in exchange the assets can be removed from your taxable estate and shielded from creditors and Medicaid — provided the transfer survives the look-back.
That trade-off — control for protection — is the heart of every comparison below. To go deeper on the structure itself, see our trusts overview and our dedicated pages on the revocable living trust and the irrevocable trust.
The 5-Year Look-Back in Plain Terms
When you apply for nursing-home Medicaid in New York, the program examines transfers made during the 60 months before the application date. Any gift or below-market transfer — including funding an irrevocable trust — triggers a penalty period: a stretch of months during which Medicaid will not pay for your care, calculated from the value transferred divided by a regional rate.
Two practical points follow:
- Timing is everything. A $400,000 transfer made 61 months before you apply is invisible to Medicaid. The same transfer made 12 months before you apply can cause years of ineligibility.
- The trust must be correctly drafted. To remove assets from countable resources, the irrevocable trust must bar you from accessing principal. Many “income-only” Medicaid trusts let the grantor keep the income stream and the right to live in a residence, while principal is locked away for the beneficiaries.
Comparing Your Real Options
There is no single right answer — the best path depends on your timeline, your assets, and your tolerance for giving up control. Here is how the main options weigh against each other.
| Option | Protects from look-back? | Keep control? | Avoids probate? | Best when |
|---|---|---|---|---|
| Do nothing | No | Full | No | You will spend down anyway or have long-term care insurance |
| Revocable living trust | No | Full | Yes | Goal is probate avoidance and incapacity planning, not Medicaid |
| Outright gift to family | After 5 years | None | N/A | Simple, but exposes assets to the recipient’s divorce/creditors |
| Irrevocable (income-only) trust | After 5 years | Partial (income/residence) | Yes | You want protection and to keep living in your home and receiving income |
| Spousal/exempt transfers | Often immediately | Varies | Varies | A healthy spouse can receive certain transfers without penalty |
Irrevocable Trust vs. Revocable Trust
People often assume any trust shields assets. It does not. A revocable trust keeps everything within your reach, so Medicaid counts it in full. The irrevocable trust is the only one of the two that addresses the look-back — at the price of giving up the right to revoke. If your concern is purely avoiding Surrogate’s Court and managing incapacity, the revocable trust may be enough. If long-term care is the worry, the irrevocable trust is the right tool. Compare them side by side on our trust vs. will page.
Irrevocable Trust vs. Outright Gift
Both start the same five-year clock. The difference is what happens to the asset after the transfer. An outright gift to a child exposes the asset to that child’s divorce, lawsuits, creditors, and spending. An irrevocable trust holds the asset under a trustee bound by fiduciary duties — the prudent-investor standard of EPTL Article 11-A, the duty of loyalty, and the duty to account — so the asset is managed and preserved rather than handed over outright. The trust also lets you keep an income stream and the right to remain in your home, which a gift cannot.
Irrevocable Trust vs. Doing Nothing
Doing nothing is sometimes the right call — for example, when a healthy spouse can absorb exempt transfers, or when long-term care insurance is in place. But for a single person with a paid-off home, inaction usually means spending the home’s equity on care before Medicaid steps in. Planning early with an irrevocable trust is what preserves that equity for the next generation.
A Note on Estate Tax
Asset-protection planning often overlaps with estate-tax planning. New York’s 2026 basic exclusion is $7,350,000, with a notorious cliff at 105% — $7,717,500 — where estates over that figure lose the entire exemption, not just the excess. Because an irrevocable trust can remove assets from your taxable estate, it can serve double duty for larger estates. A revocable trust, by contrast, offers no estate-tax benefit because the assets remain yours.
Don’t Forget Special Needs
If a child or loved one with a disability is in the picture, protecting their benefits is a separate priority. A supplemental (special) needs trust under EPTL 7-1.12 preserves means-tested benefits like Medicaid and SSI for a disabled beneficiary, holding assets for their benefit without disqualifying them. Learn more on our special needs trust page.
After the Trust Is Funded
An irrevocable Medicaid trust is not “set and forget.” The trustee must invest prudently, keep the grantor’s and beneficiaries’ interests separate, and account properly. Ongoing administration — distributions, tax filings, and recordkeeping — matters for both compliance and for proving to Medicaid that the trust is genuinely irrevocable. Our trust administration page explains what the trustee’s job involves.
Frequently Asked Questions
Does a revocable living trust protect my home from Medicaid?
No. Because you keep the power to revoke and control the assets, New York counts them as available resources. Only an irrevocable trust — or another exempt transfer — addresses the look-back.
What happens if I apply for Medicaid before the five years are up?
Transfers made within the 60-month window create a penalty period of ineligibility, calculated from the amount transferred. The trust still protects the assets long-term; you simply have to wait out or privately pay through the penalty period.
Can I still live in my home after putting it in an irrevocable trust?
Typically yes. Many New York Medicaid trusts are drafted as “income-only” trusts that let you retain the right to live in the residence and receive income, while locking the principal away for your beneficiaries.
Is an outright gift to my kids simpler than a trust?
It is simpler to execute, but it exposes the asset to your child’s creditors, divorce, and spending, and it gives you no income or right to remain in your home. An irrevocable trust under a fiduciary trustee preserves those protections.
Talk to a New York Trusts Attorney
The five-year look-back rewards people who plan ahead. The earlier you act, the more options you keep. Russel Morgan, Esq. and the team at Morgan Legal Group help New Yorkers compare these strategies and build the right structure for their family and timeline.
Schedule your consultation with Russel Morgan, Esq.
Further reading from Morgan Legal Group: the revocable living trust explained.