Can A Trust Protect Your Assets If You go to a Nursing Home?

Can a Trust Protect Your Assets if You Go to a Nursing Home?

Shirley asks, “Can my Mom use a trust to protect her assets if she has to go to a nursing home?”   This question deals with planning for Medicaid.  

Listen now: Can a Trust Protect Your Assets if You Go to a Nursing Home?

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We answer:

  • What should I do with my old retirement plan? 
  • Can I use a trust to protect Mom’s assets if she goes to a nursing home?
  • Should I use my employer’s new Roth 401k option?
  • How do I use my savings to create retirement income?
  • Can I make the maximum contribution to both a Roth IRA and the Thrift savings plan?

Transcript: Can a Trust Protect Your Assets if You Go to a Nursing Home?

This question deals with planning for Medicaid. Medicaid is for people who have no financial resources. And to qualify, you have to spend what you have for your own benefit first. It’s basically welfare for healthcare.

Protecting assets

Oftentimes, people want to transfer money to a trust or give it away to protect those assets for their kids. They would rather their kids have it than a nursing home.

Here’s how this works, especially if you’re going to use a trust. The trust needs to be irrevocable, which means your mother is no longer going to own her assets. She’s no longer going to control her assets, and she can no longer benefit directly from the assets. This poses its own challenges.

The look back

The transfer also needs to be done at least five years in advance of applying for Medicaid. Most states have a 60-month look back. If you don’t wait for the 60 months, Medicaid will ask you to pay for your own care for a while.

Here’s an example. Your mother transfers $100,000 fewer than 60 months before she applies for Medicaid.  Medicaid is going to ask her to pay for that much of her own care. 

Medicaid says the monthly amount for her care is $9,000.  This is the offset amount. Medicaid is going to ask her to pay for 11 months of care ($100,000 divided by $9,000) before they pay for anything.

To make this work, you have to be thinking way ahead. Transfers need to be done at least five years before you apply for benefits.

Other considerations

In most cases, you want to look at carving off a portion of those assets. Your mother is still going to have to live and she still has needs. She will need her assets to provide some income. Restricting all her money is not a good idea.

She also has to be comfortable with the idea that she’s giving up control of the assets. That’s difficult for a lot of people.

Work with an expert

Medicaid planning is very complex, and very involved. There are attorneys who specialize in this and you’re going to want to get them involved. It’s not something you want to do on your own.

We would be happy to recommend some local experts to help you address your concerns.

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About the Author

Neal Watson is a Certified Financial Planner™ Professional and a Financial Advisor with Fleming Watson Financial Advisors.    He specializes in helping hard working, middle class families plan for retirement.

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