When you place assets in a Medicaid Asset Protection Trust (MAPT), you're creating a powerful shield for your family's financial future. However, this protection comes with specific rules about how you can access and use these assets. The distinction between income and principal distributions is a central part of MAPT planning, directly affecting both your immediate financial security and your ability to qualify for Medicaid benefits. Whether you're considering creating a MAPT or already have one in place, knowledge of these distribution rules will help you make informed decisions about your long-term care and estate planning.
Think of a MAPT as having two distinct components: an income portion that can provide ongoing financial support, and a principal portion that remains protected for your beneficiaries. The rules governing each component are different.
What is a Medicaid Asset Protection Trust (MAPT)?
A Medicaid Asset Protection Trust (MAPT) is an irrevocable trust designed to protect your assets while helping you qualify for Medicaid benefits for long-term care. Unlike traditional revocable living trusts, MAPTs offer specific advantages for individuals planning for potential nursing home care or other long-term care needs.

When you create this type of trust, you're essentially saying, "These assets are no longer mine to control completely, but they're protected for my family's future." Traditional revocable trusts, which allow you to change your mind and maintain control, don't offer the same protection because Medicaid considers those assets still fully yours and considered countable for eligibility purposes. The MAPT works by creating a clear separation between you and your assets in the eyes of Medicaid.
How do income distributions work in a MAPT?
The rules governing income distributions form one of the most important aspects of MAPT planning. As the trust creator (grantor), you and your spouse can continue receiving income generated by the trust's assets, but Medicaid has rules addressing what constitutes allowable income.
When Medicaid evaluates your eligibility, it considers several types of income. Social Security benefits, pension payments and regular withdrawals from retirement accounts are all counted as income. Income from assets held in your MAPT, such as interest, dividends or rental payments, also counts toward Medicaid's income limits. Even irregular payments like royalties or annuity distributions are typically counted.
However, not all money you receive is considered income for Medicaid purposes. For example, tax refunds are typically treated as resources rather than income in the month received. Similarly, reverse mortgage proceeds are generally not counted as income but as loan proceeds. Some types of irregular payments might be treated as resources rather than income, depending on your state's specific rules.
Understanding these distinctions is particularly important because most states capped monthly income at $2,901 as of 2025 for individuals applying for long-term care Medicaid. This cap, known as the income limit, helps determine your eligibility for benefits. Income from your MAPT counts toward this limit, making it essential to structure your income distributions carefully.
For instance, if you receive $1,800 monthly in Social Security benefits and your MAPT generates $800 in monthly rental income, your total countable income would be $2,600 – still under the limit. However, if your MAPT investments generate an additional $400 in monthly dividends, your total income would exceed the limit, potentially affecting your Medicaid eligibility.

This is where careful trust design becomes crucial. An attorney might recommend strategies such as:
- Structuring investments to generate lower current income while focusing on long-term growth.
- Timing certain distributions to manage monthly income levels.
- Using specific types of investments that align with Medicaid's income rules.
- Considering state-specific income treatment rules in your planning.
The key is balancing your need for current income with your long-term goal of Medicaid eligibility. Your trustee will need to manage trust investments and distributions with these considerations in mind.
What are the principal distribution restrictions?

The principal (or corpus) of the trust operates under stricter rules than income. Neither you nor your spouse can access the trust's principal once assets are transferred into the MAPT. This restriction is fundamental to the trust's asset protection features and Medicaid eligibility strategy.
The trustee, who must be someone other than you or your spouse, has full control over managing the trust's principal. While they can buy, sell or trade assets within the trust, they cannot distribute principal directly to you or your spouse. This arrangement ensures the assets remain protected while still allowing for prudent management.
When should you consider creating a MAPT?
Timing is crucial when establishing a MAPT. All asset transfers into the trust must occur at least five years before applying for Medicaid benefits due to the "look-back" period. This means early planning is essential – waiting until you need long-term care could leave your assets vulnerable.
You might consider creating a MAPT if you:
- Want to protect significant assets while maintaining income access.
- Are in good health but concerned about future long-term care needs.
- Have time to plan ahead due to the five-year look-back period.
- Wish to preserve wealth for your beneficiaries while qualifying for Medicaid.
What assets should you consider placing in a MAPT?

Strategic asset selection for your MAPT can optimize both protection and income generation. Common assets to consider include:
- Investment portfolios generating regular income.
- Rental properties providing steady cash flow.
- Your primary residence (with special considerations).
- Business interests with regular distribution schedules.
- Securities and bonds producing predictable returns.
What role does the trustee play in asset management?
The trustee's responsibilities in managing a MAPT are significant and must be carefully considered. They must:
- Make investment decisions that balance income generation with principal preservation.
- Ensure all distributions follow trust guidelines and Medicaid regulations.
- Maintain accurate records of all trust transactions.
- Act in the best interests of both current and future beneficiaries.
- Navigate complex legal and financial decisions regarding trust assets.
Conclusion
While the distinction between income and principal distributions may seem complex at first, this structure serves an essential purpose: allowing you to maintain financial stability through income access while protecting core assets for your family's future. The success of a MAPT strategy depends heavily on timing, thoughtful asset selection and the appointment of a capable trustee who understands both their fiduciary responsibilities and Medicaid's regulations.
Early planning remains crucial, as the five-year look-back period means that decisions made today will affect your options for years to come. Working with experienced professionals who understand both estate planning and Medicaid regulations can help ensure your MAPT is structured appropriately for your specific circumstances. Remember that while the rules governing MAPTs may seem restrictive, particularly regarding principal distributions, these limitations are precisely what makes the trust an effective tool for asset protection and Medicaid planning.