New Jersey Trust Attorney Christine Matus Explains How Irrevocable Trusts Protect Assets From Medicaid

RED BANK, NJ - Families planning for long-term care in New Jersey face strict Medicaid asset limits that can require spending down savings before qualifying for benefits. New Jersey trust attorney Christine Matus of The Matus Law Group (https://matuslaw.com/is-an-irrevocable-trust-protected-from-medicaid-in-new-jersey/) is providing guidance on how irrevocable trusts can protect assets from Medicaid eligibility requirements and estate recovery while preserving wealth for future generations.

According to New Jersey trust attorney Christine Matus, an irrevocable trust is a separate legal entity that holds assets for named beneficiaries, and once created, it cannot be changed, amended, or revoked except under specific circumstances. The critical factor in Medicaid planning is whether the trust can pay the grantor or pay for the grantor's benefit. "If the trust retains any provision allowing distributions to or for the benefit of the person who created it, Medicaid may treat those assets as available resources," explains Matus.

New Jersey trust attorney Christine Matus notes that Medicaid sets a resource maximum of $2,000 for an individual and $3,000 for a couple when both are treated as a couple for eligibility purposes. In 2026, the Community Spouse Resource Allowance ranges from $32,532 to $162,660 depending on the couple's total resources. Assets placed inside a properly structured irrevocable trust are not counted toward these limits, provided the trust cannot make payments to or for the benefit of the grantor.

Attorney Matus emphasizes that the five-year look-back rule is one of the most important considerations in Medicaid planning with irrevocable trusts. Medicaid reviews all financial transactions made within 60 months before an application date, and any asset transfers during this period may be classified as gifts that trigger penalty periods. "Transferring assets into a trust without accounting for the look-back period can result in months of ineligibility at a time when care is most needed," she advises.

New Jersey calculates transfer penalties using the state's penalty divisor, which represents the average daily cost of nursing home services. Effective April 1, 2025, the penalty divisor is $402.74 per day. The penalty period begins when an individual applies for Medicaid and would otherwise be eligible, not when the transfer is made. Transferring assets into an irrevocable trust more than five years before applying for Medicaid avoids the penalty entirely.

The Matus Law Group also assists families with strategies to avoid Medicaid estate recovery, which allows the state to reclaim costs paid for long-term care after a recipient's death. New Jersey defines "estate" for Medicaid recovery broadly to include property such as a home, bank accounts, trusts, annuities, and other property interests. Medicaid Asset Protection Trusts remove assets from an individual's estate so the state cannot place claims against them after death. "Families who plan ahead with the right trust structure can ensure their home and savings pass to their loved ones rather than being subject to recovery claims," Matus highlights.

Additional strategies include life estate deeds, which transfer ownership of a home while retaining the right to reside there, and the caregiver-child exemption, which allows transfer of a primary residence to an adult child who provided at least two years of care that delayed or prevented nursing home placement. Each of these options must comply with specific Medicaid regulations and requires proper documentation.

Irrevocable trusts also offer potential tax advantages for families. Whether trust assets are included in a taxable estate depends on the rights retained after the transfer, and the trust's structure determines how capital gains and income taxes are handled. Matus notes that grantor trusts and non-grantor trusts carry different tax implications, making proper drafting essential to achieving the desired outcome.

For those considering long-term care planning in New Jersey, consulting with an experienced trust attorney may help protect assets and preserve Medicaid eligibility. The Matus Law Group serves families throughout Monmouth County and New Jersey from offices in Red Bank and Toms River.

About The Matus Law Group:

The Matus Law Group is a Red Bank-based law firm dedicated to estate planning, Medicaid planning, and asset protection. Led by attorney Christine Matus, who has practiced law for over 30 years, the firm helps families throughout Monmouth County, Ocean County, and New Jersey protect their assets and plan for long-term care. For consultations, call (732) 785-4453.

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