How Trusts, Annuities, and Burial Funds Affect Your Countable Assets for MSP

In the 37 states that apply an MSP asset rule, one exclusion is simple and guaranteed: up to $1,500 per person set aside in a designated burial fund, plus your burial plot itself, doesn't count toward your resource limit. Trusts and annuities are a different story — they can shelter assets or they can backfire, depending entirely on how they're structured.

Burial Funds and Burial Spaces: The Easy Exclusion

Federal SSI resource rules — which most state MSP programs follow — exclude two burial-related items automatically:

• Burial space: a burial plot, crypt, casket, vault, or headstone — for you or an immediate family member — is excluded from your countable resources entirely, with no dollar cap.
• Designated burial funds: up to $1,500 per person set aside specifically for burial expenses — in a separate, clearly identified account or a revocable burial trust — is excluded from the asset test. Commingling this money with regular savings can cause the whole account to lose the exclusion, so keep it in its own account.

How Trusts Are Generally Treated

The general rule under federal Medicaid law is that a trust counts as an available resource for eligibility purposes if you — the applicant — have any legal right to direct payments from it to yourself. A few common patterns:

• Revocable trusts you established: the full value is typically counted as a resource, since you can revoke the trust and reclaim the assets at any time.
• Irrevocable trusts: whether the principal counts depends on whether any circumstance would let it be paid to you. Money that's genuinely out of your reach is generally not a countable resource — but any income the trust distributes to you still counts as income in the month you receive it.
• Special needs trusts: a properly drafted first-party special needs trust, established for the sole benefit of a person with a disability under age 65, has a specific statutory exemption from Medicaid transfer penalties (42 U.S.C. § 1396p(d)(4)(A)) — but it's a narrow exception with strict drafting requirements, not a general-purpose asset-sheltering tool.

Annuities: Handle With Extra Caution

Annuities sit in a genuinely gray area of federal Medicaid law, and treatment varies more by state than almost anything else in the asset test. As a rule of thumb: an annuity's cash surrender value counts as a resource if you can access it, while regular payments you receive from an annuity count as income in the month received. Some states apply additional scrutiny to annuities purchased shortly before applying, similar to how long-term-care Medicaid reviews asset transfers.

Because a mistake here can mean a denied application or a penalty, don't restructure savings into a trust or annuity to try to qualify for MSP without professional advice first. An elder law attorney or a benefits counselor through your State Health Insurance Assistance Program (SHIP) can review your specific accounts against your state's rules before you make any changes.

Remember: Many States Skip This Entirely

None of this matters if you live in one of the 14 jurisdictions that report no MSP asset test — your trusts, annuities, and savings are not reviewed for MSP eligibility. In states that do test assets, see our full breakdown of what counts toward the 2026 asset limit for standard exclusions such as your home and one vehicle.

Want to see where you stand today? Our free eligibility checker takes about 90 seconds and factors in your state's specific asset rules. Check your eligibility now.

Trust and annuity law is highly fact-specific and varies by state. This article explains general federal principles and is not legal or financial advice — confirm how a specific trust, annuity, or account will be treated with your state Medicaid agency or a qualified elder law attorney before relying on it for MSP planning.