For most Long Island homeowners the house is the whole question. It is the largest asset, it is where the family history sits, and it is the thing everyone quietly hopes to keep. Whether it belongs in a Medicaid asset protection trust depends on facts that vary from household to household.

What you need to know

  • A primary residence can generally be deeded into a Medicaid asset protection trust, and doing so is one of the more common uses of these trusts in New York.
  • The transfer is a gift for Medicaid purposes, so the timing relative to any future application matters more than almost anything else.
  • The homeowner typically keeps the right to live in the house for life, and residence based tax exemptions can often be preserved with careful drafting.
  • An existing mortgage or home equity line does not automatically prevent a transfer, but the lender’s documents must be reviewed first.
  • The trust holds title, so the trustee signs at any future closing and the sale proceeds stay in the trust.
  • Figures and program rules change; anything relied on should be confirmed for the year in question.

Can the house legally be transferred into the trust?

Yes. A new deed is prepared conveying the property from the owner to the trustee of the irrevocable trust. It is recorded with the county clerk like any other deed. In Suffolk County that means recording with the county clerk’s office, along with the required transfer tax forms.

Transfers into a trust of this kind are usually structured so that no real estate transfer tax is due, because no consideration changes hands, but the forms still have to be filed correctly. Errors at this stage are common when families use an online deed service, and they can be expensive to unwind later. The firm handles the deed preparation and recording as part of its real estate work so the deed and the trust actually match.

What changes for me day to day?

Less than most people expect. A homeowner who transfers a residence into a properly drafted MAPT and retains the right of occupancy continues to live in the house, continues to have the run of it, and is generally responsible for the ordinary costs of living there.

What changes is legal title and the ability to sell or borrow unilaterally. The trustee holds title. A sale requires the trustee to sign. A refinance is complicated and often not available at all. The homeowner cannot take the house back out of the trust on a change of heart.

This is the real decision point. Everything else about a house in trust is mechanics. The question worth sitting with is whether the homeowner is genuinely comfortable no longer being able to sell or borrow against the property on their own signature.

What about my STAR exemption and property taxes?

Residence based property tax exemptions, including STAR, enhanced STAR, senior exemptions, and veterans exemptions, are generally tied to ownership and occupancy. Trusts are addressed in the rules, and when the grantor retains the right to occupy the property, these exemptions can often continue.

Two things matter here. The trust must be drafted with the exemption rules in mind, and the assessor may need to see the trust instrument or a summary of it. The safest approach is to confirm the treatment with the local assessing unit at the time of the transfer rather than discovering a problem on the next tax bill. Exemption rules and income tests are periodically revised, so current requirements should be checked for the applicable year.

What if there is still a mortgage or a home equity line?

A mortgage does not make the transfer impossible, but it does add a step. Most mortgages contain a due on sale clause that can be triggered by a transfer of title. Federal law limits enforcement of that clause for certain transfers into inter vivos trusts where the borrower remains a beneficiary and an occupant, and many lenders will not object when the situation is explained. Not all will.

The practical sequence is to review the note and mortgage, determine whether the transfer falls within a protected category, and where appropriate notify the servicer. Home equity lines deserve particular attention, because a lender may freeze the line following a title change even where it does not call the loan.

Homeowners with a reverse mortgage are in a different position again. Those loans have their own occupancy and title requirements, and transferring the property without addressing them can accelerate the loan. The firm discusses that separately under reverse mortgages.

Can the house still be sold after it is in the trust?

Yes, if the trust permits it, and most well drafted trusts do. The trustee signs the contract and the deed. The proceeds go into the trust, not to the grantor personally. That last point is essential. Depositing sale proceeds into the grantor’s personal account can undo the purpose of the transfer entirely.

Many trusts also allow the trustee to purchase a replacement residence with the proceeds, so a downsizing move to a smaller house or a condominium can be handled without restarting the plan. If a sale is anticipated, counsel should review the trust before the property is listed.

What about capital gains when the house is sold?

This is where drafting earns its keep. Most New York MAPTs are structured as grantor trusts for income tax purposes, which generally allows the primary residence capital gains exclusion to remain available on a sale during the grantor’s lifetime, depending on the facts and on continued use of the property as a principal residence.

Structuring also affects what happens at death. Property that remains includable in the grantor’s taxable estate generally receives a basis adjustment, which can substantially reduce or eliminate capital gains for the beneficiaries who inherit it. Property given outright during life typically does not get that treatment. On a Long Island house purchased decades ago, that difference can be the largest single number in the entire plan.

Who pays the bills, and whose name is on the insurance?

  • Property taxes and utilities are usually paid by the occupant, consistent with the retained right to live there
  • The homeowner’s insurance policy should be updated to reflect the trust as an owner, with the occupant named as well
  • The insurance carrier should be told about the transfer; failing to do so can create a coverage dispute at the worst possible moment
  • Major repairs and capital improvements should be documented, since who paid for what can matter later
  • Any rental of the property changes the analysis and should be discussed with counsel first

What if I change my mind?

The trust is irrevocable, so there is no unilateral undo. That said, the documents can be drafted to include flexibility that many families find sufficient: a retained power to change who ultimately inherits, the ability to remove and replace a trustee, and trustee authority to sell and reinvest. In limited circumstances, and with the agreement of the necessary parties, New York law provides mechanisms to modify or terminate an irrevocable trust, but nobody should sign one on the assumption that it can be reversed.

Is a trust always the right answer for a house?

No. Some households are better served by a life estate deed, some by transfers that qualify as exempt under Medicaid’s transfer rules, some by long term care insurance, and some by doing nothing at all and paying privately. A trust that a family cannot live with is not a good plan. The firm’s elder law practice reviews the options against actual circumstances rather than starting from a preferred product.

If a house on Long Island is the center of a family’s planning question, a conversation is the right next step. The firm offers a free and confidential initial phone consultation. Call 1-800-488-6734 or use the contact page to arrange a meeting at the East Setauket office or, by appointment, at the Hampton Bays office.

Frequently asked questions

Will putting my house in a trust protect it from a nursing home?

No plan can be promised to produce that result. A properly drafted and timely funded trust may cause the residence to be treated as unavailable for Medicaid eligibility purposes, depending on the type of Medicaid, the funding date, and the facts of the household. Timing relative to any application is usually the deciding factor.

Can I put the house in trust and keep my name on the deed?

Not if the goal is Medicaid planning. Retaining an ownership interest generally keeps the asset countable. What the grantor keeps is the right to live there, which is a different thing from ownership and is created by the trust terms rather than by the deed.

Do my children need to agree to this?

Legally, no. The homeowner creates the trust. Practically, involving the family is usually wise, because a child will likely serve as trustee and will need to understand the responsibilities. Plans made in secret tend to produce disputes later, sometimes in Surrogate’s Court through the firm’s estate administration practice.

What happens to the house when I die?

It passes according to the trust terms, generally without a probate proceeding for that property. The trustee handles the transfer or sale. Beneficiaries who inherit property that remained includable in the taxable estate often receive a basis adjustment, which can matter a great deal on a long held Long Island home.

How long does the whole process take?

Drafting and signing a trust is usually a matter of weeks, depending on how quickly documents are gathered. Recording the deed follows the signing. What takes real time is the waiting period that applies to transfers, which is why families are generally better off starting the conversation earlier than they think necessary.