More than half of seniors will need paid long-term care eventually. Unfortunately, Medicare does not cover the custodial care you would receive in a nursing home, and it doesn’t pay for in-home care.
Medicaid is the widely embraced solution because it will extend to long-term care for seniors. To shape a financial profile that will lead to eligibility, you can work with an elder law attorney to create a Medicaid trust. Let’s look at the details.
Connecticut’s Medicaid Asset Limit
Medicaid is a needs-based program, so Connecticut has a $1,600 asset limit, but not everything is countable. Certain assets are considered exempt, such as personal belongings, one vehicle, and your primary residence.
Home Ownership
Many people are surprised to learn they can still qualify for Medicaid while owning their home, if the equity is within the allowed limit (just over $1 million). That sounds reassuring at first, but there is a critical catch.
Even though the home may not prevent eligibility, Connecticut will seek repayment through estate recovery after your death.
If you die owning the home in your name and it passes through probate, Medicaid can place a lien and recover what the program spent on your care. For most people, the home is the most valuable asset, so this is a very big deal.
While direct home ownership may not block Medicaid approval, it leaves the door open for full reimbursement later. The better approach is to prevent the home from being part of your probate estate in the first place.
Irrevocable Medicaid Trust
To protect assets from Medicaid spend-down and estate recovery, you can transfer them into an irrevocable Medicaid trust. Once assets are placed in the trust, you no longer own them. They belong to the trust, and the trustee manages them for the benefit of future beneficiaries.
This applies to your house, savings, investments, and other assets you want to preserve.
That separation is what makes the trust effective. Since you do not control or have access to the principal, Medicaid does not treat the assets as yours.
However, this protection is not immediate. Connecticut enforces a five-year look-back period. Any transfers into the trust within five years of applying for Medicaid create a penalty period of ineligibility.
This means timing is everything. The trust works only when you plan in advance, while you are still healthy enough to wait out the look-back period.
No Lifestyle Disruptions
A major concern people have is losing access to the earnings produced by their savings or investments. Dividends, interest, and rental income often supplement retirement income. Many seniors rely on that cash flow and do not want to “sell the cash cow.”
Fortunately, using a Medicaid trust does not automatically mean sacrificing that income. You give up access to principal, but the trust can still hold income-producing assets.
The trustee manages them, and if the trust is drafted correctly, you can receive the income those assets generate.
This structure makes funding the trust practical. You preserve principal for the next generation while maintaining financial stability during your lifetime.
Placing the home in the trust also avoids estate recovery, so your beneficiaries can receive it without Medicaid placing a lien after death.
Bringing It All Together
As we stated above, before you apply for Medicaid, you may continue to receive the income generated by trust assets. That income is yours to use just as you always have. This is why the Medicaid trust is often called an “income-only” trust.
However, once you actually qualify for Medicaid and start receiving long-term care benefits, the income no longer goes directly into your pocket. Medicaid will count it and require most of it to be paid toward the cost of your care.
You will be allowed to keep only a small personal needs allowance. Medicaid then covers the remaining cost of your care.
The key takeaway is simple:
- Principal in the trust is protected.
- Income may still be paid to you.
- Once on Medicaid, that income goes toward care, but it does not disqualify you.
If you want to protect what you have earned while still maintaining financial stability, the Medicaid trust offers a balanced solution.
Let’s Get Started!
We have a Westport, CT estate planning office, and another location in Glastonbury, and you can send us a message or call us at 860-548-1000 to schedule a consultation. If you would like to learn more about this important process before taking that step, join us at an upcoming seminar.
- Medicaid Planning vs. Crisis Planning: What’s the Difference? - August 6, 2026
- Does the Five-Year Medicaid Look-Back Apply to Home Ownership Transfers? - July 21, 2026
- What Is Estate Tax Exclusion Portability? - June 25, 2026
Estate Planning for Young Families: Action Is Required
( By appointment only )