As healthcare costs rise, more families are thinking ahead about long-term care and how it might impact their financial security. Nursing home expenses can be substantial, often burdening personal savings and real estate. Without a plan, the assets you spent a lifetime building could be depleted quickly.
Using a trust is one of the most effective strategies to protect your estate. When properly established, trusts can prevent your assets from being counted when determining Medicaid eligibility, while ensuring your property is passed on to your family. Below, we explain how to use a trust to protect your assets from nursing home, clarify the types of trusts, and outline practical steps to secure your estate.
Does a Trust Protect Your Assets from Costs Like A Nursing Home?
A trust can protect your assets in stages of life when senior living communities under the right circumstances. However, not all trusts are created equal. The level of protection depends mainly on whether the trust is revocable or irrevocable, as well as how and when it is established.
In general, trusts that remove your control over assets, such as irrevocable trusts, are more effective at protecting wealth. Trusts that allow you to maintain control, like revocable trusts, are usually disregarded for Medicaid eligibility. Understanding these distinctions is crucial for families aiming to preserve their assets.
Related: What Is Trust Accounting for a Trust
Does a Revocable Trust Protect Assets from Nursing Home Costs?
Revocable trusts, also called living trusts, are popular for estate planning because they allow you to retain control of your assets during your lifetime. These trusts help avoid probate and can make transitions smoother after death. However, they do not shield your assets from nursing home expenses.
Because you can change or cancel a revocable trust at any time, Medicaid considers the assets within it to be fully available. Those assets may need to be spent before Medicaid pays for long-term care. While a revocable trust is helpful for many purposes, it does not offer protection from nursing home costs.
Does an Irrevocable Trust Protect Assets from Nursing Home Costs?
On the other hand, an irrevocable trust transfers ownership of your assets to the trust itself. Once assets are placed in this trust, you no longer have direct access to or control over them. This change in ownership allows irrevocable trusts to protect those assets from being counted toward Medicaid eligibility.
Timing is key for this strategy to work. Medicaid has a five-year look-back period. Assets transferred to an irrevocable trust must remain untouched during that time to avoid penalties. When done correctly, this trust can effectively shield your home and savings from nursing home costs.
Asset Protection Trust vs. Irrevocable Trust: What’s the Difference?
While all asset protection trusts are irrevocable, not all irrevocable trusts serve the same purpose. An asset protection trust is explicitly designed to prevent creditors from seizing your assets or spending on long-term care. It includes language and structure that align with Medicaid rules and estate planning laws.
A standard irrevocable trust may not offer full protection from nursing home costs, depending on how it is written. Working with an estate planning professional is important to ensure your trust is properly crafted to withstand Medicaid scrutiny and achieve your protection goals.
Can a Nursing Home Take Your House if It Is in a Trust?
If your home is placed in an irrevocable trust early enough, it can be protected from nursing home recovery. Because the house is no longer legally owned by you, it is not counted as part of your Medicaid estate, and the nursing home cannot force its sale to cover care costs.
However, if your home remains in a revocable trust or is still titled in your name, it remains a countable asset. This leaves it vulnerable to Medicaid spend-down requirements or estate recovery after your passing. Properly transferring your home into an irrevocable trust is a key step in securing it from long-term care expenses.
Can a Nursing Home Take Your House?
Technically, a nursing home does not take ownership of your home. What happens instead is that Medicaid may seek reimbursement for the cost of care through estate recovery after your death. If your house is part of your estate, the state may place a claim on it, which could result in its sale to settle the debt.
This process underscores the importance of early planning. If the home is placed in an irrevocable trust more than five years before applying for Medicaid, it is generally safe from estate recovery. That means your home can pass to your beneficiaries, not the state.
Will Medicare Take My House if I Go into a Nursing Home?
Medicare is a federal health insurance program that covers short-term skilled nursing care after a qualifying hospital stay. It does not pay for long-term care, such as ongoing nursing home stays. As such, Medicare does not “take” your house but does not shield it from the financial implications of extended care.
If you need long-term care, you’ll likely have to turn to Medicaid, which looks at your assets, including your home. If your home is not protected through a trust or other planning tool, it could be subject to Medicaid recovery efforts after your death.
How to Avoid Losing Your House
To prevent the loss of your home to nursing home expenses, the most effective step is to place it in an irrevocable trust before the Medicaid look-back period begins. This legal structure removes the house from your estate, meaning it cannot be used to repay Medicaid costs later.
Other strategies include transferring the home to a spouse, if married, or qualifying under Medicaid’s exemptions for certain family members. However, establishing trust remains one of the most reliable tools for long-term protection.
Related: How to Put your House in a Trust
How to Protect Your Parents’ Assets
Adult children often worry about how to help aging parents preserve their assets while planning for future care. Encouraging your parents to meet with an estate planning advisor early is key. If they are still in good health, it is time to place significant assets, like a home or savings, into an irrevocable trust.
You should also consider helping them appoint a durable Power of Attorney and explore whether a professional trustee may be appropriate. These steps ensure their wishes are honored, and their estate is better protected from costly long-term care bills.
Related: The Benefits of a Professional Trustee
How to Protect Assets if Spouse Goes Into Nursing Home
If one spouse enters a nursing home, the other, referred to as the “community spouse,” has certain protections under Medicaid rules. However, those protections may not preserve all assets, especially if joint property or accounts are involved.
Placing assets into an irrevocable trust before a spouse needs care can help ensure the community spouse retains sufficient resources. Proper planning can also help avoid Medicaid penalties and reduce emotional and financial stress during a difficult time.
Can a Nursing Home Costs Take Your Inheritance?
Suppose you receive an inheritance while on Medicaid; it could jeopardize your eligibility. That lump sum may need to be spent before benefits resume, or Medicaid could deny future coverage. This makes proactive planning critical, especially when elderly beneficiaries are involved.
To protect an inheritance from long-term care costs, you may use a third-party special needs or irrevocable trust. These structures allow the inheritance to be used for your benefit while preserving Medicaid eligibility and shielding the assets from direct seizure.
Start Protecting Your Assets Today
The best time to plan is before you need care. Don’t wait until your savings, home, or inheritance are at risk. Whether you’re planning for yourself, a spouse, or aging parents, the right trust can make all the difference.
Contact Smith Marion to schedule a consultation and learn how we can help you protect your assets with confidence, clarity, and compliance.