Frequently-Asked Questions about Protecting Your Assets from the Nursing Home

Question 1: How much do nursing homes cost?

Answer: According to a recent survey, the average length of stay in a nursing home is 2 ½ years. Nursing home costs average $102,000 a year, with an average cost per stay of $255,000.

Question 2:   Will Medicare pay for my nursing home costs?

Answer:  No. Medicare does not the pay the expenses of long-term care incurred for day care at adult centers, home care by relatives or employed caretakers, and nursing home care. Medicare pays limited benefits for skilled nursing care only.

Question 3:  What government program will pay for my nursing home costs?

Answer:  In the United States, the government program that pays for most nursing home care is Medicaid, which is a federal and state medical program for persons who meet certain asset and income levels. Some veterans are entitled to veterans benefits to pay for their nursing home care.

Question 4:  How can I avoid being impoverished by the high cost of nursing home care?

Answer: The answer usually depends upon your marital status, and whether you are already in the nursing home or you anticipate a lengthy stay in the nursing home. It is almost never a good idea for people who aren’t facing a lengthy in the nursing home to give away assets.

Question 5: How much income can I make and qualify for Medicaid?

Answer: Any person over 64 whose net income is less than approximately $2,199 a month can qualify. Persons with more than this amount can also qualify depending upon their nursing home costs. Income must be paid to the nursing home.

(Note: The dollar amounts on this Web page can and usually do change annually. You should not rely on these figures in your planning until you have verified the current figures.)

Question 6: Can I transfer my assets to my children just before I go into a nursing home and still qualify for Medicaid? 

Answer:   Under the 60-month Look-back Rule, eligibility for Medicaid may be denied if the person going into the nursing home transferred assets for less than fair market value within 60 months before his application for Medicaid benefits.

And be very careful about giving away assets: once you have given away your assets, you cannot get them back by legal action. Don’t rely on your children to “do the right thing” and hold the assets for you in case you need them. See our “Pitfalls of Giving Away Your Home” for some good reasons why you should not give away your assets.

Question 7:  If I am in the nursing home, is it too late to give away my assets and qualify for Medicaid?

Answer: No, it’s never too late. In fact, depending upon a person’s circumstances, it may be legally possible for him or her to give away all assets and qualify for Medicaid immediately.

Question 8: Should I use a trust to protect my assets?

Answer: Assets are usually transferred to children or other family members either outright or to a trust for your benefit. A trust can be more desirable than an outright transfer to a child because:

a) You may have a bad relationship now or in the future with: 1) your child or 2) your son-in-law or daughter-in-law

b) Your child may: 1) get divorced, 2) have creditors or go bankrupt, 3) invest your assets unwisely, 4) spend all of your assets during your life, or 5) spend all of your assets as soon as you die.

There are problems with the trust, however. You do not have access to the money in the trust. At most, only the income that the money or property in the trust earns can be distributed to you. The trustee of your trust must not have any discretion to distribute trust principal to you; otherwise the principal will be considered a resource for Medicaid purposes.

Question 9:  Are there other ways to protect my assets?

Answer:   Yes.   The Medicaid law does not penalize you for spending your assets, only for giving them away. See our “Myths About Medicaid” for more information about Medicaid’s transfer-of-assets rules. For example, you can make fair market value purchases to benefit yourself or your spouse, such as for home repairs and improvements or a burial plan.

Question  10:  How can I protect my house?

Answer: The Medicaid applicant may retain a principal residence. The homestead is exempt property. After the Medicaid recipient’s death, however, the house can be sold and Medicaid reimbursed unless there is a surviving spouse. Maybe a transfer or sale of the residence to the children with the parent reserving a life estate is advisable. Although the value of the life estate might still be at risk during the applicant’s life, there are certain planning possibilities available to protect the life estate. Again, the key word is “maybe.” See our “Pitfalls of Giving Away Your Home” for some good reasons why you should not give away your home and other assets.

Question  11:   Isn’t it wrong to hide assets in order to qualify for Medicaid?

Answer:  Hiding assets in order to qualify for Medicaid is a crime.   It’s called Medicaid fraud.  That’s not what elder law attorneys who help their clients become Medicaid-eligible do.  The cardinal rule is full disclosure to the government’s Medicaid agency.

It is not illegal to structure one’s assets in an effort to qualify for Medicaid nursing home benefits. Elder law attorneys advise their clients on the Medicaid law and what can and cannot be done legally within the law. Some people, however, believe it is wrong to do legal Medicaid planning. That’s a different issue. See our “Is Medicaid Planning Ethical?” for more on this controversial subject.

Question 12: Should I hire an attorney to help me?

Answer:  Yes.  You could try to figure this out for yourself, but if you make a mistake or overlook a strategy that results in your having to pay more to the nursing home than you should have, you could have used the money you lost to the nursing home to pay an attorney to help you.  Remember: professional help is expensive, but mistakes cost more.

This article was written by Timothy L. Takacs, Certified Elder Law Attorney.