Protecting Your Assets from Long-Term Care Costs

by NEIRG NEWS | Aug 31, 2017

protect assets long term care costs

Elder care planning is an important element of properly addressing one’s long-term needs. For some individuals, elder care planning may include securing care in a nursing home, assisted living facility and/or in-home nursing services. The importance  of including these services in one’s retirement plan is made evident in the fact that Americans have been found to significantly underestimate long-term care costs. The data below from Genworth’s 2016 Cost of Care Study shows a general breakdown of the median annual cost of long-term care, however, actual costs may vary significantly from state-to-state:

Median Annual Cost of Long-Term Care

  • Adult Day Care $17,680
  • Assisted Living $43,539
  • Homemaker Services $45,760
  • In-Home Health Aide $46,332
  • Nursing Home (semi-private room) $82,125
  • Nursing Home (private room) $92,378

Long-term care costs can have a significant impact on one’s retirement and legacy plans. With an average nursing home stay of over one year and considering some of the other services listed above may be called upon prior to an individual being admitted into a nursing home, it is important to plan well in advance as such expenses have the potential to drain majority of one’s resources, leaving him with a depleted estate and potentially dependent on Medicaid. After a Medicaid recipient passes away, the state attempts to recoup from the deceased’s estate any benefits it paid for the recipient’s care, also known as “estate recovery.” In this article, we’ll outline several potential strategies for protecting your assets from long-term care costs but we always recommend consulting a qualified estate planning attorney to determine the most appropriate solution for your specific needs.

Durable Power of Attorney

In the initial estate planning stages, you’re encouraged to choose a durable power of attorney for health care and financial decisions in the event you lose the capacity to make decisions for yourself. Be sure to choose someone you can not only trust but also someone who understands your medical wishes (such as your stance on resuscitation), financial goals, and legacy plans.

Life Estate

For many Medicaid recipients, the only asset available in the estate recovery process is their house. A basic and relatively inexpensive option for protecting your primary residence is through a life estate, which is a certain type of joint ownership structure in which the current owner retains the right to live in the property or rent it out for his lifetime, while the other owner (known as the remainderman) receives the right to future ownership interest in the estate.


While individuals may create a living will and designate a Power of Attorney to make decisions on their behalf, a revocable living trust provides more control and flexibility. Your assets transfer into the revocable trust, of which you are the trustee; responsible for managing and benefiting from the trust assets. The trust agreement assigns successor trustee responsibilities in the event of incapacity or death.

Revocable trusts are helpful in managing trust assets to ensure disposition and usage during incapacitation are in line with your wishes and goals, however, they do not help in protecting your assets from long-term care costs or estate recovery since you retain beneficial ownership. In order to shield your assets properly, an irrevocable trust may be used. When a transfer of assets into an irrevocable trust occurs, those assets are considered removed from the owner’s estate and out of reach of creditors. The owner generally relinquishes control and access to the property.


Gifting is a straightforward strategy to protect assets from creditors while fulfilling legacy goals. Gifting during one’s lifetime also provides the ability to witness the recipient’s use of such gifts. Be aware of annual and lifetime gift limits, though.

Income Protection

For those with income and after they are Medicaid-eligible while institutionalized in a nursing home, the federal government allows income protection for their noninstitutionalized spouses up to a certain limit under Medicaid’s “spousal impoverishment” provisions enacted in 1988.

When preparing for the possibility of long-term care in a nursing home, protecting your assets may seem like a daunting task. Luckily, the process includes a variety of options—from preparing a life estate or a trust, to giving monetary gifts and transferring income—many of should begin years in advance to ensure proper protection since asset transfers have a five-year lookback period whereas they remain unprotected from creditors and Medicaid recovery for  five years after the transfer/gift date. We recommend consulting with a qualified estate planning attorney to determine the most appropriate solution for your situation.