Can A Nursing Home Take Your House If It Is In A Trust?

Can a nursing home take your house if it’s in a trust?

In this article, you’ll learn about:

if a nursing home can take your house if it’s in a trust
how to avoid a nursing home taking your house
what happens to assets if you go into a nursing home
how to protect parents’ assets from nursing homes
whether an irrevocable trust protects assets from nursing homes

Let’s dig in.

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Can A Nursing Home Take Your House If It Is In A Trust?

In general, a nursing home can take your house if it’s in certain types of trusts.

Revocable Living Trust: If you place your house in a revocable living trust, you typically retain control and ownership of the property during your lifetime. Medicaid rules may treat the property as a countable asset for eligibility purposes because you have the ability to revoke the trust and access the property’s value. However, there are planning strategies that may help protect the property’s value.
Irrevocable Trust: Transferring your house to an irrevocable trust, where you relinquish control and ownership, can provide better asset protection. However, Medicaid has a “look-back period” during which transfers to irrevocable trusts are subject to scrutiny. If you transfer your house to an irrevocable trust and apply for Medicaid within the look-back period (typically five years), it may affect your eligibility.

When Can Nursing Home Take Your House?

A nursing home cannot directly take your house.

However, the cost of nursing home care and Medicaid eligibility rules can impact your home and other assets.

Here are common scenarios in which your home might be affected:

Medicaid Eligibility: Many individuals eventually need Medicaid to cover the costs of nursing home care. Medicaid has strict asset and income limits, and in some cases, individuals must spend down their assets to qualify. This may include selling or liquidating assets, including a home, depending on the state’s rules.
Estate Recovery: In some cases, Medicaid may seek recovery of the costs it incurs for nursing home care from your estate after your passing. This could include the value of your home if it is part of your estate. However, many states have exemptions and protections in place to prevent the forced sale of a primary residence in certain circumstances, such as if a spouse or dependent relative continues to live there.

How To Avoid Nursing Home Taking Your House

Protecting your home from being used to pay for nursing home care or being taken by a nursing home involves careful planning.

Here are ways to avoid a nursing home taking your house:

Plan in Advance: The best way to protect your home is to plan well before you need nursing home care. Advance planning allows you to explore different options without the pressure of immediate need.
Irrevocable Trust: Consider transferring ownership of your home to an irrevocable trust. An irrevocable trust removes the home from your estate for Medicaid eligibility purposes, but you must do this well in advance of needing care to avoid the Medicaid look-back period.
Homestead Exemptions: Some states offer homestead exemptions, which protect a portion of your home’s value from creditors, including nursing homes. The level of protection varies by state.
Spousal Protections: Medicaid rules often include protections for spouses. If one spouse needs nursing home care, the home may be protected to ensure the other spouse can continue to live there.
Life Estate: In some cases, you can retain a life estate in your home, allowing you to live there until your passing, while the property passes to beneficiaries outside of probate.
Long-Term Care Insurance: Consider purchasing long-term care insurance, which can help cover the cost of nursing home care without jeopardizing your home.
Medicaid Planning: Consult with an elder law attorney who specializes in Medicaid planning. They can help you navigate the complexities of Medicaid rules and develop a plan that aligns with your goals.
Personal Residence Trust: Explore the possibility of creating a Personal Residence Trust (PRT), which can protect your home while providing you with a stream of income.
Gifting: Gifting your home or assets to family members or loved ones may be an option, but it must be done well in advance of needing care to avoid Medicaid penalties.
Purchase Long-Term Care Annuities: In some cases, long-term care annuities can be used to protect assets while covering nursing home care expenses.

What Happens To Assets If You Go Into A Nursing Home?

Here’s a general overview of what can happen to your assets when you enter a nursing home:

Private Pay: If you have sufficient financial resources, you can choose to pay for nursing home care using your own assets. In this case, your assets will be used to cover the cost of care.
Medicaid Eligibility: Many individuals eventually turn to Medicaid to cover the costs of nursing home care, as it is a government-funded program for those with limited financial resources. Medicaid has strict asset and income limits. To qualify, you may need to sell or liquidate assets like property or investments.
Look-Back Period: Medicaid has a “look-back period” during which any asset transfers or gifts made within a certain timeframe (typically five years) before applying for Medicaid can affect eligibility. Transferring assets during this period may result in a penalty period during which you are ineligible for Medicaid benefits.
Spouse and Dependent Protections: Medicaid rules often include protections for the spouse and dependent relatives of the Medicaid recipient. The home, for example, may be protected to ensure the other spouse can continue to live there.
Irrevocable Trust: Some individuals place assets, including their home, in an irrevocable trust well in advance of needing care. This can remove those assets from their estate for Medicaid eligibility purposes.
Personal Allowance: Medicaid rules typically allow nursing home residents to retain a small personal allowance from their income each month for personal expenses.
Estate Recovery: In some cases, Medicaid may seek recovery of the costs incurred for nursing home care from your estate after your passing. This could include the value of your home if it is part of your estate.

How To Avoid Medicaid 5-Year Lookback

The Medicaid 5-year lookback period is a crucial consideration when planning for long-term care.

This period examines financial transactions, including asset transfers, made by individuals applying for Medicaid.

To avoid penalties and maximize eligibility, you should plan ahead and make informed decisions.

Here are ways to avoid the Medicaid 5-year lookback period:

Start Planning Early: The most effective way to avoid Medicaid penalties related to the look-back period is to start planning well in advance of needing Medicaid assistance. The look-back period typically covers the five years before applying for benefits, so early planning allows you to make strategic decisions.
Gift and Transfer Timing: Be cautious about asset transfers and gifts. Gifts or asset transfers made within the look-back period can result in a period of ineligibility for Medicaid benefits. Consider making gifts or transfers outside the look-back period.
Irrevocable Trust: Create an irrevocable trust to protect assets from being counted for Medicaid eligibility purposes. Assets transferred to an irrevocable trust are typically not subject to the look-back period, provided the trust is structured correctly and established well in advance.
Personal Residence Exemptions: In some states, Medicaid rules include exemptions that protect a primary residence. Ensure you understand the rules in your state, as these exemptions can vary.
Spousal Protections: Medicaid rules often include protections for the spouse who remains at home. Ensure the at-home spouse has adequate income and resources, and consider the impact of the look-back period when planning.
Medicaid-Compliant Annuities: Explore the use of Medicaid-compliant annuities to convert assets into income streams that are exempt from the look-back period.
Long-Term Care Insurance: Purchase long-term care insurance to help cover nursing home costs without depleting assets. This can be a valuable tool for avoiding Medicaid-related issues.

Does A Irrevocable Trust Protect Assets From Nursing Home?

Yes, an irrevocable trust protects assets from nursing homes.

However, the trust must:

be a certain type of trust,
be an irrevocable trust that satisfies the Medicaid lookback period, or
be

Some states allow for “special needs trusts” or “pooled income trusts,” which may allow for asset transfers without penalties.

In general, real estate held in a properly established and funded Special Needs Trust (SNT) is protected from being used to pay for nursing home costs.

Special Needs Trusts are designed to preserve assets for the benefit of individuals with disabilities.

They also allow them to maintain eligibility for government benefits, such as Medicaid.

A “normal” irrevocable trust can protect assets from nursing homes.

However, it must be established correctly and well in advance of needing long-term care.

Irrevocable trusts are often designed to provide asset protection from various creditors, including nursing homes.

Since the assets are no longer considered the property of the grantor, they are generally shielded from claims by creditors.

Let’s say you eventually need Medicaid to cover nursing home costs.

There is typically a Medicaid lookback period.

This is a period during which asset transfers may affect Medicaid eligibility.

Let’s say the property transfer falls outside of the lookback period.

The nursing home still won’t have a claim to the property.

However, you will also still be personally liable for paying for your nursing home care.

Get Help With Nursing Home Planning

If you want help planning for nursing home costs, fill out the form below.

At The Hive Law, we understand the importance of:

protecting your hard-earned assets
ensuring your family’s future
not losing everything to creditors and lawsuits
properly (and legally) distributing assets

We only accommodate a limited number of clients each month.

So don’t miss your opportunity to work with our estate planning lawyers.

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Tailored solutions to fit your unique needs and goals
Expert guidance in navigating complex tax and legal matters
Preservation of your wealth for future generations
Streamlined asset distribution according to your wishes

Avoid the pitfalls of inadequate estate planning strategies:

Creditors seizing your assets
Lawsuits jeopardizing your family’s financial security
Family disputes over inheritance
Costly and time-consuming probate processes

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Can A Nursing Home Take Your House If It Is In A Trust?

Table of Contents

The Hive Law Has Been Featured In

Get A FREE Consultation!

Can A Nursing Home Take Your House If It Is In A Trust?

When Can Nursing Home Take Your House?

How To Avoid Nursing Home Taking Your House

What Happens To Assets If You Go Into A Nursing Home?

How To Avoid Medicaid 5-Year Lookback

Does A Irrevocable Trust Protect Assets From Nursing Home?

Get Help With Nursing Home Planning

Get A FREE Consultation!

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