How to Protect Assets From Nursing Home Costs

As healthcare costs continue to rise, many individuals and families are seeking effective strategies to protect their assets. Knowing how to safeguard your financial resources is crucial for ensuring peace of mind and preserving your legacy for future generations. Below, we’ll explore various methods to protect assets from nursing home costs, including legal tools such as trusts, strategic use of the gift tax, and long-term care insurance. By proactively planning and making informed decisions, you can mitigate the financial burden of nursing home expenses and secure your financial future.

A financial advisor can help you create a financial plan for your healthcare needs and goals.

What Happens If You Go Into a Nursing Home?

Before you can figure out how to protect the assets in your estate plan, it’s important to understand the financial mechanics that unfold when you go into a nursing home. The costs of staying in a nursing home vary based on the state. But here’s a look at the average costs:

Median annual cost of a semi-private room: $114,665
Median monthly cost of a semi-private room: $9,555
Median annual cost of a private room: $131,583
Median monthly cost of a private room: $10,965

It’s easy to see how these costs could spiral out of control quickly. The good news is that Medicare may help to cover some of the costs for low-income individuals. But even with the help of government programs, you could be facing significant costs.

How to Protect Assets From Nursing Home Costs

If you’re worried about the strain of nursing home costs on your nest egg, then protecting your assets should be a priority. Here are five common ways to protect assets from nursing home costs:

Buy long-term care coverage: Long-term care insurance is specifically designed to help you cover the costs of nursing home care. The coverage can help you pay for the gap between what Medicare covers and what it costs without dipping into your nest egg. Although the annual costs of a long-term care insurance policy can be steep, it will serve to protect your assets in the event of a nursing home stay. If you don’t end up using the insurance policy, you won’t receive any funds back.
Buy a Medicaid-compliant annuity: A Medicaid-compliant annuity is designed to help you receive monthly payments. However, the annuity will not count towards your assets. That’s a big deal when it comes to government programs covering your nursing home costs. Typically, a lower net worth means more assistance to cover your home costs. But you’ll still get to hang on to the monthly payment from your annuity.
Create an irrevocable trust: The irrevocable trust transfers the control of your assets from you to a beneficiary. The key word of this asset protection option is irrevocable. Once you create this trust, you will no longer have any control over the assets. So, the beneficiary will be in charge. But depending on your situation, you might be comfortable with ceding control of the assets. When you transfer assets into this trust, it will lower your net worth. And with that, you may qualify for more government help in picking up the costs of your nursing home stay.
Draft a life estate: A life estate is an option to shelter your real estate assets. This vehicle will give your spouse ownership over the assets in the estate. Essentially, this stops the government from taking the property to cover nursing home costs. If one spouse dies in the nursing home, the other can inherit the property. But it’s critical to do this ahead of time. If a spouse passes away within five years of creating a life estate, the surviving spouse would be on the hook for a Medicaid fine.
Give financial gifts: Gifting financial assets to your family to lower your net worth could help you qualify for more Medicare assistance. But there’s a limit to how much you can give without encountering the gift tax.

As of 2025, you cannot gift more than $19,000 in assets or cash to a family member without filing a gift tax return with the IRS. However, an individual’s combined lifetime exemption from federal gift or estate taxes is $13.99 million in 2025, and increases to $15 million in 2026 courtesy of the One Big Beautiful Bill Act (OBBA).

Medicaid Eligibility and the Look-Back Period

A man and his son discuss how to protect assets from nursing home costs.

Medicaid’s eligibility rules play a part of planning when it comes to potential nursing home costs. Medicaid evaluates both income and assets when determining whether someone qualifies for long-term care coverage. Countable assets can include checking and savings accounts, investments, and property other than a primary residence. Because nursing home care is expensive, many applicants must have limited resources before Medicaid begins paying for care.

Medicaid also reviews an applicant’s recent financial history. Most states use a five-year look-back period that examines transfers of money or property. If an asset was given away or transferred for less than fair market value during this window, Medicaid may impose a penalty period. During the penalty period, Medicaid will not pay for long-term care, even if the person otherwise meets the eligibility criteria.

This review affects strategies such as gifting, transferring ownership of property or placing assets into certain types of trusts. If these actions occur within the look-back period, they may delay eligibility for coverage. Because of this, the timing of asset transfers plays a direct role in how Medicaid evaluates an application.

Some assets are treated differently under Medicaid rules. A primary residence, certain personal belongings, and specific income streams may be considered non-countable in some situations. How these items are classified depends on state regulations and the applicant’s circumstances.

Understanding how Medicaid applies eligibility criteria and reviews past transfers helps clarify how asset-protection strategies interact with these rules. The asset class, the look-back period, and the potential for penalty periods all shape how an application is assessed and when coverage may begin.

Bottom Line

Protecting assets from nursing home costs is important for safeguarding your financial future. As healthcare expenses continue to rise, planning ahead can help ensure that your hard-earned assets remain intact. Consulting with a financial advisor or elder law attorney can provide personalized guidance tailored to your specific situation. By taking proactive steps now, you can protect your assets and ensure that your financial legacy is preserved for future generations.

Estate Planning Tips

A financial advisor can help you protect your assets. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
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