A revocable trust doesn't protect assets from a nursing home because it gives the grantor ownership of the assets. Instead, an irrevocable trust (specifically in the form of a MAPT) can protect your wealth from nursing homes and clear the way for you to receive Medicaid assistance.
No one “takes” assets from the patient; the nursing home simply requires payment for its services if the patient intends to reside in the nursing home.
Loss of Asset Access
Similarly to the above disadvantage, putting assets in a trust means you don't have immediate access to them. Even if you have a very open, revocable trust, taking assets from the trust to your personal bank account or elsewhere requires filing paperwork and extra time.
Establishing and maintaining a trust can be complex and expensive. Trusts require legal expertise to draft, and ongoing management by a trustee may involve administrative fees. Additionally, some trusts require regular tax filings, adding to the overall cost.
An irrevocable trust offers your assets the most protection from creditors and lawsuits. Assets in an irrevocable trust aren't considered personal property. This means they're not included when the IRS values your estate to determine if taxes are owed.
Other states, such as California and Texas, prohibit Estate Recovery after the surviving spouse dies. The only exception is if the surviving spouse was also a Medicaid recipient.
There are also two state exceptions when it comes to the Look-Back Period – California and New York. There is no Look-Back Period for HCBS Waivers in California, and it's 30 months (2.5 years) for Nursing Home Medicaid, although that will be phased out by July 2026, leaving California with no Look-Back Period.
Placing assets into an irrevocable trust is the best strategy. It not only protects family assets from creditors, it also eliminates the countable assets for Medicaid eligibility purposes and hence accelerates the time when Medicaid benefits can kick-in.
If you have existing unpaid medical bills, and go into a nursing home and receive Medicaid, the program may allow you to use some or all of your current monthly income to pay the old bills, rather than just to be paid over to the nursing home, providing you still owe these old medical bills and you meet a few other ...
If you are in a nursing home for fewer than 90 days, your SSI benefits will not be affected.
Can Medicare take your home to cover nursing home expenses? Medicare can't take your home and doesn't cover nursing home room and board. However, a Medicaid lien can be placed on your home, and they can sell it once you pass to recover the funds.
It should be stated at the outset that nursing homes and other similar facilities do not “take” people's assets – although it can feel that way! The reality is, any person in need of a nursing home stay is required to pay for the services provided.
Other Parties Cannot Gain Access to Your Assets
Since your assets in an irrevocable trust are no longer under your control, it is difficult for creditors or those who file a civil suit against you to gain access. You can take other steps to build in additional protections.
The average fee for creating a revocable living trust ranges from $1,500 to $3,000 nationwide, although it is usually much higher in California where costs can escalate to $5,000 to $10,000 or more.
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.
Transfer assets to an Irrevocable Trust
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.
and is a Certified Financial Planner. Nursing homes can't take a senior's life insurance benefits away from designated family beneficiaries to cover outstanding costs. However, nursing homes can accept payments from the resulting funds of a sold or surrendered policy.
For your parents, it may be illegal to sell the house and property. If your parents are going to live in a nursing home, the facility will very likely place a lien on the house. They will want to tap into the equity to help defray the costs of caring for your parents.
California stands apart from the other states. In CA, Medicaid (Medi-Cal) recipients can gift inheritance, which is considered “income”, the month in which it is received. Furthermore, Medi-Cal recipients have no asset limit, and therefore, can have unlimited assets and still be eligible for long-term care benefits.
Selecting the wrong trustee is easily the biggest blunder parents can make when setting up a trust fund. As estate planning attorneys, we've seen first-hand how this critical error undermines so many parents' good intentions.
An asset protection trust (APT) is a complex financial planning tool designed to protect your assets from creditors. APTs offer the strongest protection you can find from creditors, lawsuits, or judgments against your estate. These vehicles are structured as either "domestic" or "foreign" asset protection trusts.
Trusts also can be very useful for asset protection purposes if the creditors of the beneficiary are prevented from reaching the trust's assets. A trust can be an effective way to place assets outside the reach of creditors. However, not all forms of a trust will function as an asset protection device.