Protecting Assets from Long Term Care Expenses

Many elders are faced with the possibility of requiring long-term care in a nursing facility toward the end of their lives. Many are also under the false belief that Medicaid pays for most of this care. The fact is that the government setup Medicaid as a form of “last resort” payment for such services, and Medicaid funds are withheld from those that still have the assets to afford care. Keeping some simple laws in mind will help elders to plan for their care expenses without having to sell everything to afford care.

Why Last Minute Transfers Don’t Help

The government quickly got wise to the fact that families would rapidly sell off assets just a few years before the elder would require care. They could see it coming, and they were planning ahead to get Medicaid coverage. Unfortunately, they were not planning ahead far enough. The giving away of many major assets less than five years before the time an elder applies for Medicaid will trigger an automatic ineligibility period on the assumption that those assets could have been used to pay for care.


The government does not expect every ounce of property to be used for a person’s care. This means that many assets are exempt and do not count when determining Medicaid eligibility. Common examples include a home, car, personal affects and income-inducing or business related properties such as offices.

The Home

The elder’s primary home is considered exempt so long as the applicant or their spouse still lives in it, but there are a variety of special rules to keeping it exempt or transferring it without penalty.

Normally, the primary residence is exempt so long as the spouse is living in it, but certain high value properties are not exempt. If the equity value of the home is more than $500,000 then the home is no longer exempt. This can be a major issue for a high-value property. Some states have a higher value of $750,000.

Transferring the property can work in some cases without penalty so long as the property is transferred to a child who is under 21, a blind or disabled child, or a son or daughter that has been residing in the home for more than two years before the date of application.

Spousal Transfers

Many elders try to transfer assets to a spouse, but this does not work because the assets of both individuals are used to determine eligibility.

Transfers to Children

Exemptions for transferring assets to a child is only effective if the child is blind or disabled, so transferring to an otherwise healthy child will not protect the asset.

Undue Hardship

If an elder’s application is denied or triggers an ineligibility period, then there is the option for undue hardship. The applicant must prove that they cannot get care without Medicaid and that without that care they will die.

The Bottom Line

The best way to protect assets from Medicaid liquidation requirements is to sell them early. Any assets given away or sold more than five years before the application date will not trigger the penalty. Keep exempt assets and transfer everything else to someone other than the spouse before the five year mark.


Like us on facebook