Senior Living says that the average monthly cost for a private nursing home room in the U.S. in 2025 will be $1,600. S. is $10,025, that’s $120,304 annually. Families who don’t plan ahead could have to sell their homes or use their savings to pay for care if they don’t. Fortunately, legal tools like trusts and early planning can help prevent this from happening.
When you apply for Medicaid, your house is often considered a countable asset. If your assets exceed Medicaid’s $2,000 limit, you may be required to sell or spend down your home’s value to qualify for benefits. But if you plan ahead, you can keep your home safe from these needs while still getting the care you need.
At Jarvis Law Office, we guide you every step of the way. We have a dedicated team to handle moving your assets into the trust’s name. Best of all, you stay in control of your investments and continue working with your financial advisor without disruptions.
Do you worry about how to protect your property and hard-earned cash from the sky-high costs of nursing home care? You’re not the only one. Nursing home costs are now over $100,000 a year and are going up even more, so many families are looking for legal ways to leave their legacy.
I’ve researched the most effective strategies to protect assets from nursing home costs, and I’m sharing them with you in this practical guide. Whether you’re planning for yourself or helping your parents, these methods can help safeguard your financial future.
Why Protecting Your Assets from Nursing Home Costs Matters
First, let’s talk about why this is so important. According to Genworth Financial, the average cost of nursing home care each year in 2021 was
- Semi-Private Room: $94,900 (increased by 1.96%)
- Private Room: $108,405 (increased by 2.41%)
Even more concerning? With 3% annual inflation, a semi-private room could cost more than $171,400 per year two decades from now. That’s enough to quickly deplete most people’s life savings!
Many folks end up relying on Medicaid for long-term care, but qualifying isn’t simple. Medicaid has strict asset limits and a five-year “look-back” period designed to prevent people from transferring assets just to qualify for benefits.
That’s why planning ahead—at least five years before you might need nursing home care—is absolutely crucial,
7 Effective Strategies to Protect Your Assets
1. Purchase Long-Term Care Insurance
Long-term care insurance is one of the most straightforward ways to protect your assets. These policies cover costs associated with nursing homes, assisted living facilities, and even in-home care.
Benefits:
- Covers nursing home expenses up to your policy limits
- Reduces reliance on personal savings
- Preserves assets for other priorities or inheritance
Drawbacks:
- Premiums can be expensive and have increased dramatically in recent years
- No cash value if you never need nursing home care (similar to term life insurance)
According to the Department of Health and Human Services, approximately 22% of adults will need care for more than five years, while only 12% will need it for less than a year. This makes long-term care insurance worth considering despite its cost.
2. Set Up an Irrevocable Trust
An irrevocable trust is one of the most powerful tools for asset protection. When you place assets in this type of trust, you no longer legally own them—the trust does.
How it works:
- You transfer ownership of assets to the trust
- A trustee manages these assets according to the trust’s terms
- Because you don’t own the assets directly, they aren’t counted for Medicaid eligibility
“Assets placed in the trust are legally no longer yours, and you must name an independent trustee,” explains Certified Estate Planner Chuck Czajka.
Important consideration: The five-year Medicaid lookback period applies, meaning you need to establish the trust at least five years before applying for Medicaid.
3. Create a Medicaid-Compliant Annuity
With a Medicaid-compliant annuity, your assets are turned into a stream of income that Medicaid can’t use against your eligibility. This plan works especially well for married couples where one partner needs nursing home care.
“Annuity purchasers are effectively giving a lump sum of money to an annuity company in exchange for equal amounts of monthly payments to a healthy spouse while the other unhealthy spouse is receiving medical assistance subsidized by Medicaid,” explains Shawn Plummer, CEO of The Annuity Expert.
Requirements for a Medicaid-compliant annuity:
- Must be irrevocable
- Must be non-transferable
- Must pay out over your life expectancy
- In many cases, the state must be named as a beneficiary for any remaining funds after death
This option is often used in “crisis planning” situations when nursing home care is imminent.
4. Establish a Life Estate
Wondering how to prevent a nursing home from taking your house? A life estate might be the answer.
With a life estate, you can give someone else (usually a family member) ownership of your home while still being able to live there until you die. You become the “life tenant,” and the person who will get the property after you die is called the “remainderman.” “.
As Steven Weisman, an elder law attorney, explains, “The home passes to the ‘remainderman’ who is the person listed on the deed as the person to inherit the property upon the death of the ‘life tenant.'” Unlike joint tenancy, the remainderman has no interest in the property until after your death.
This arrangement can protect your home from being counted as an asset for Medicaid eligibility while ensuring you have a place to live.
5. Gift Assets to Family Members
Giving financial gifts to family members is another popular strategy for reducing your countable assets.
The IRS currently allows you to gift up to $18,000 per person each year without triggering gift taxes. By gradually transferring wealth through gifts, you can reduce the size of your estate and potentially qualify for Medicaid more easily.
Important warning: Remember Medicaid’s five-year look-back period! Any gifts made within five years of applying for Medicaid could result in penalties and a delay in eligibility.
If considering this approach, start early and keep detailed records of all gifts.
6. Transfer Income to a Spouse
If you’re married and one spouse requires nursing home care, you can transfer some of your monthly income to your healthy spouse (known as the “community spouse”).
The Federal Spousal Impoverishment Act provides legal protection for this arrangement, allowing the community spouse to maintain financial stability while the other spouse receives necessary care.
This strategy helps balance the gap between the state’s exempted amount and what’s needed for nursing home care.
7. Create a “Pour-Over” Trust
A pour-over trust provides financial security for both you and your spouse. This type of trust:
- Shields assets from seizure
- Offers easy access to funds when needed
- Prevents financial worries for either spouse
You can modify or create wills that include testamentary trusts to provide welfare for a surviving spouse, keeping shared wealth safe even if one partner passes away first.
Additional Tips to Remember
Keep Detailed Financial Records
Since Medicaid reviews your financial history during the five-year look-back period, maintain thorough records of:
- Bank statements
- Receipts for large expenses
- Documentation of any financial gifts
- A comprehensive list of all assets (including life insurance, investments, property titles)
These records will make the Medicaid application process much smoother if you eventually need to apply.
Consider Family Dependents
If you have dependent adults or minor children living with you, you can allocate more funds for spousal maintenance. Simply increase the monthly amount by one-third per dependent to ensure every member of your household is cared for.
Be Aware of Estate Recovery
Under the Omnibus Budget Reconciliation Act, state Medicaid officials can recoup covered funds from your estate after you pass away. This means that unprotected assets could still be lost to future generations unless you take proper steps beforehand.
When Should You Start Planning?
The answer is simple: NOW!
Because of Medicaid’s five-year look-back period, the best time to start implementing these strategies is at least five years before you think you’ll need nursing home care. Since none of us can predict the future with certainty, earlier planning is always better.
Consult With an Expert
While this guide gives you a solid overview of asset protection strategies, everyone’s situation is unique. I strongly recommend consulting with an elder law attorney or estate planning professional who specializes in Medicaid planning.
These experts can help you:
- Navigate complex Medicaid rules
- Set up trusts correctly
- Create a comprehensive plan tailored to your specific needs and assets
- Ensure all your documentation is properly prepared
Final Thoughts
Protecting your assets from nursing home costs isn’t about avoiding paying for care—it’s about legally preserving the legacy you’ve worked so hard to build. With proper planning, you can ensure both quality care for yourself or your loved ones AND financial security for your family’s future.
Remember, the sooner you start planning, the more options you’ll have available. Don’t wait until a health crisis forces your hand—take action today to protect what matters most.
Have you started planning to protect your assets? What strategies are you considering? I’d love to hear about your experiences in the comments below!
Use a Medicaid-Compliant Trust
A Medicaid Asset Protection Trust (MAPT) is one of the most effective ways to protect your home from Medicaid. By transferring ownership of your house to an irrevocable trust, it is no longer counted as your personal asset. This means Medicaid cannot require you to sell it to qualify for nursing home care.
To use this strategy, you must set up the trust and transfer the property at least 5 years before applying for Medicaid to comply with the look-back period. The trust will now legally own the house, but you can still live there for the rest of your life.
The main advantage of a Medicaid trust is that your home remains protected from Medicaid recovery after your death.
Additionally, the trust allows the house to pass directly to your heirs without going through probate. For instance, if you put your $300,000 home into a trust six years before you need Medicaid, the house is not counted toward your eligibility and stays in your family.
Create a Life Estate
A life estate is another way to protect your home while maintaining the right to live in it.
In this arrangement, you transfer ownership of the house to someone else, such as a child, while reserving “life tenant” rights for yourself. In other words, you can live in and control the house for as long as you want, but when you die, the new owner automatically takes over ownership.
The benefit of a life estate is that it protects the property from Medicaid recovery because it is no longer part of your estate. Additionally, the house bypasses probate, making the transfer seamless for your heirs.
Life estates also simplify inheritance and make sure that the property stays within the family. However, this strategy works best when you plan ahead since it may not protect your home if done too close to when Medicaid is needed.
How to Protect Yourself from Nursing Home Costs?
FAQ
How to protect your assets if you have to go into a nursing home?
6 ways to protect assets from nursing home costsPurchase long-term care insurance. Purchase a Medicaid-compliant annuity. Form a life estate. Put your assets in an irrevocable trust. Consider financial gifts to family members. Start saving statements and get expert advice.
How to make your assets untouchable?
Want to make your assets virtually untouchable by creditors and lawsuits? Equity stripping may be the answer. Using this advanced method, you secure your property with liens or mortgages held by creditors you know and trust, like an LLC or trust you run.
What is the best trust to avoid nursing home costs?
If you want to protect assets from nursing home costs, consider establishing an irrevocable Trust. Setting up a Trust will transfer ownership of the cash to the Trust account, which is managed by a trustee. As a result, the money is no longer considered part of your estate, but rather a property of the Trust.
Can a nursing home take your house if it is in a trust?
Once your home is in the trust, it’s no longer considered part of your personal assets, thereby protecting it from being used to pay for nursing home care. However, this must be done in compliance with Medicaid’s look-back period, typically 5 years before applying for Medicaid benefits. Dec 3, 2023.
How do I protect my assets from the financial strain of nursing home care?
Here are five tips to protect your assets from the financial strain of nursing home care: Long-term care insurance is a proactive approach to managing the costs of nursing home care. These policies can cover a significant portion of the expenses associated with long-term care, providing you with financial peace of mind.
How to protect assets from nursing home costs?
Monetary gifts, life estates, annuities, irrevocable trusts and pour-over trusts are common strategies to protect assets from nursing home costs.
How do I protect my house from nursing home care costs?
To protect your house from nursing home care costs, consider transferring it to an irrevocable trust or creating a life estate. An irrevocable trust removes your ownership, and a life estate allows you to transfer the house to a family member while keeping the right to live there.
Can long-term care insurance protect your assets from nursing home costs?
Those with long-term care insurance may keep their assets and still receive help with exorbitant nursing home costs. One of the best ways to keep your money safe from nursing home costs is to buy a Medicaid-compliant annuity and turn it into income.
Can a trust protect assets from nursing home costs?
Yes, certain types of trusts, like irrevocable trusts, can protect assets from nursing home costs. By placing your assets in an irrevocable trust, you remove them from your direct ownership, so it’s more difficult for creditors to claim them. It can also help reduce the size of your estate for Medicaid purposes.
Should I give away assets before entering a nursing home?
Giving away assets shortly before entering a nursing home will protect them. Fact: Medicaid has a “look-back” period that can result in penalties for recent asset transfers. If my spouse or I go into a nursing home, I will lose my home. Fact: There are ways to protect your home and qualify for Medicaid.