What Happens If I Go To A Nursing Home? How Do I Protect My Assets Then?

Apr 7

This is one of the most common and complicated questions when it comes to estate and long-term care planning. The answer isn’t always straightforward, and even among attorneys, there are different approaches. However, one widely used solution is the irrevocable trust—commonly referred to as a nursing home protection trust.

What Is a Nursing Home Protection Trust?

A nursing home protection trust is an irrevocable trust that holds your assets so they are no longer considered yours for Medicaid eligibility purposes. The key to this strategy is timing. Once assets are transferred into the trust, you must get beyond the five-year lookback period. When you apply for Medicaid to cover the cost of long-term care, the state looks at all asset transfers you made in the five years prior to your application. If done correctly, and you do not apply for Medicaid within those five years, the assets in the trust are generally protected. If a transfer is done within that five-year period, Medicaid may treat those assets as if you own them, resulting in a penalty period of ineligibility for Medicaid benefits.

Important Rules to Understand: Regulations Differ in Massachusetts and New Hampshire

It's critical to know that these trusts are not one-size-fits-all. Each state has its own rules and limitations. For example, provisions allowed in Massachusetts might not be allowed in New Hampshire. New Hampshire's provisions are generally more restrictive, and fall under more scrutiny, while Massachusetts is less restrictive. That’s why working with an attorney familiar with your state’s Medicaid laws is essential.

Another important rule is that you cannot be the trustee of this type of trust, and you cannot access the principal. This is consistent with both Massachusetts and New Hampshire. That means once the asset is placed in the trust, it is no longer yours. For example, if your home is transferred into the trust, the trustee may sell that home and purchase a new one in the name of the trust, and you can still live there. However, you cannot receive the sale proceeds from that transaction for your own use during your lifetime. Irrevocable trusts can sometimes be revoked if the creation happened when the grantor was not of sound mind, the purpose of the trust has been achieved, the trustees and beneficiaries agree to dissolve it, or other reasons

The Bottom Line:

When you create a nursing home protection trust, you are effectively giving away the asset for the rest of your life. It’s a big decision and one that should not be made lightly. But for many people, especially those who want to protect their home or savings from long-term care costs, it can be a powerful tool—if done properly and with the right legal guidance.

Want to learn more about protecting your home and savings from nursing home costs?

I help families create thoughtful, legally sound plans that safeguard their assets while ensuring eligibility for long-term care benefits. If you fall within the five-year lookback period or are not ready to transfer assets into an irrevocable trust, that does not mean you are out of options. If you have questions about setting up a nursing home protection trust or want to review your existing plan, I can help you understand your options and design a strategy that fits your goals. Whether you're just starting to plan or need guidance on an existing trust, click the link below to schedule a call with me today. I’m always happy to help!

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