How to Shelter Assets from Nursing Home Care Costs

By Bryan Driscoll, J.D.

How to Shelter Assets from Nursing Home Care Costs

By Bryan Driscoll, J.D.

As a society, we live longer than we did in the recent past, and living longer can result in increased costs as we age. In 2018, average annual costs for a private room in a nursing home exceeded $100,000. Although this number varies geographically, it's a substantial amount.

Hand using a calculator

If you want to avoid being surprised by rising nursing home care costs and have the ability to pay for your care, you can take action today.

1. Plan ahead.

As with most things in life, planning is crucial. You may not want to think about having to live in a nursing home, but if you tackle these hard decisions now, you can plan for it and make yourself more comfortable later in life. Planning now can also help reduce the financial and emotional burden on your loved ones.

Medicaid covers nursing home care for people with low incomes. Even if you wouldn't normally fall into the low-income category, there are ways to shelter your assets and increase your chances of eligibility for nursing home care coverage.

2. Set up a trust.

A key component to proper planning is setting up a trust; in the case of nursing home costs, you want to set up a living trust. It is illegal to hide money from the government, but a living trust helps you shelter your money and assets so you don't have to spend as much, or any, out of pocket.

A living trust provides the security you need: you can maintain control over your finances but remove your assets from your name. When the government looks at your ability to pay for nursing home costs, they'll find little or none because everything resides in the living trust.

3. Consider an annuity.

Some states do not consider annuity payments when looking at eligibility. By transferring some of your assets into an annuity, you can increase your chances of qualifying for Medicaid without having to take the next step of spending down your assets.

4. Spend your money.

A final option for sheltering money is to spend it. That might sound counter-intuitive, but it's actually a solution that requires forethought and planning.

When the government looks at your ability to pay for nursing home costs, any assets you transfer during the five years before going to a nursing home count toward your ability to pay. Medicaid refers to this as the look-back period.

It's important to start your spending early enough. Spending your assets in a calculated, planned manner is preferable to spending frivolously. Gifting money and assets to your family members throughout your life helps you spend down your financial holdings in preparation for the Medicaid look-back period.

When gifting money, it's important that you do not gift more than the tax-free annual limit, which, for 2018, is $15,000 to each individual. If you gift more than $15,000 to any individual, you owe taxes on the full amount.

These are just a few of the ways you can prepare for increasingly high nursing home costs. Whatever path you choose, start planning today. By being proactive, you can ensure your loved ones don't bear the burden.

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