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How to Avoid a Nursing Home Taking Your House

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According to Senior Living, in 2025 the average monthly cost for a private nursing home room in the U.S. is $10,025, that’s $120,304 annually. With costs this high, failing to plan ahead could force families to sell their homes or drain their savings to pay for care. Fortunately, legal tools like trusts and early planning can help prevent this from happening.

When you apply for Medicaid, your house is often considered a countable asset. If your assets exceed Medicaid’s $2,000 limit, you may be required to sell or spend down your home’s value to qualify for benefits. However, with proper planning, you can shield your home from these requirements while still getting the care you need.

At Jarvis Law Office, we guide you every step of the way. We have a dedicated team to handle moving your assets into the trust’s name. Best of all, you stay in control of your investments and continue working with your financial advisor without disruptions.

Key Takeaways

  • Use tools like trusts or life estates to protect your home from Medicaid.
  • Plan early to avoid Medicaid’s 5-year look-back penalties.
  • Professionals can help you understand Medicaid rules and safeguard assets.
  • Alternatives like sale-leasebacks or insurance offer extra protection.

5 Ways to Protect Your Home from Nursing Home Costs 

5 Ways to Protect Your Home from Nursing Home Costs 

If you or a loved one uses Medicaid to cover nursing home costs, the state may attempt to recover assets, including your home, for repayment. Fortunately, there are several effective strategies to protect your assets and help you to afford the necessary end-of-life care.

1. Use a Medicaid-Compliant Trust

A Medicaid Asset Protection Trust (MAPT) is one of the most effective ways to protect your home from Medicaid. By transferring ownership of your house to an irrevocable trust, it is no longer counted as your personal asset. This means Medicaid cannot require you to sell it to qualify for nursing home care.

To use this strategy, you must set up the trust and transfer the property at least 5 years before applying for Medicaid to comply with the look-back period. While the trust becomes the legal owner of the house, you retain the right to live in it for the rest of your life.

The main advantage of a Medicaid trust is that your home remains protected from Medicaid recovery after your death. 

Additionally, the trust allows the house to pass directly to your heirs without going through probate. For example, if you transfer a $300,000 home into a trust six years before you need Medicaid, the house is excluded from Medicaid’s calculations and remains in your family.

2. Create a Life Estate

A life estate is another way to protect your home while maintaining the right to live in it. 

In this arrangement, you transfer ownership of the house to someone else, such as a child, while reserving “life tenant” rights for yourself. This means you can live in the home and control it for the rest of your life, but ownership automatically transfers to the new owner upon your passing.

The benefit of a life estate is that it protects the property from Medicaid recovery because it is no longer part of your estate. Additionally, the house bypasses probate, making the transfer seamless for your heirs. 

Life estates also simplify inheritance and make sure that the property stays within the family. However, this strategy works best when you plan ahead since it may not protect your home if done too close to when Medicaid is needed.

3. Leverage the Medicaid Look-Back Period

The Medicaid look-back period is an important factor in protecting your home. Medicaid reviews all financial transactions, including property transfers, made within 5 years before you apply for benefits. If you transfer your house within this time frame, Medicaid may impose a penalty, delaying your eligibility for nursing home coverage.

For instance, if you transfer a $200,000 house to a family member four years before applying for Medicaid, and the average nursing home cost in your state is $10,000 per month, Medicaid could impose a penalty of 20 months, during which you would need to pay for care out-of-pocket.

The key to avoiding penalties is early planning. By transferring your home to a trust or using a life estate more than 5 years before you need Medicaid, you can protect the property from Medicaid’s calculations and penalties. Proactive planning with a qualified elder law attorney is essential to avoid costly mistakes.

4. Consult a Medicaid Planning Professional

Medicaid’s rules are complicated and vary by state, which is why working with a Medicaid planning professional or elder law attorney is really valuable. These professionals can help you understand complicated regulations and create a customized plan to protect your home and assets.

A professional can assist with advising on state-specific exemptions that might apply to your situation. Their guidance can make sure that all transfers are properly timed to comply with the look-back period and avoid penalties.

Additionally, Medicaid planning professionals can identify other overlooked strategies, such as leveraging caregiver exemptions or managing spend-downs effectively. With their help, you can avoid common pitfalls and feel confident that your home and financial future are secure.

5. Sale-Leaseback as an Alternative

If you need immediate funds but still want to live in your home, a sale-leaseback arrangement might be an option. This involves selling your house to an investor or company and then renting it back, giving you access to your home’s equity without moving out.

In this scenario, the proceeds from the sale can be used to cover nursing home costs, medical expenses, or other financial needs. At the same time, you retain the right to live in your home as a tenant. If you sell your house for $250,000 and pay $1,500 per month in rent, you gain immediate liquidity while maintaining your residency.

While this is not a traditional Medicaid planning strategy, it can be helpful for those who need quick cash or have not planned far enough in advance to use tools like trusts. Sale-leaseback agreements also allow you to avoid Medicaid’s asset recovery rules because the house is no longer in your name.

Protect Your Home with Jarvis

In 2019 the U.S. Department of Health and Human Services reported that 70% of adults aged 65+ will need long-term care at some point. 

If protecting your home and savings is your priority, we’re here to make it simple. At Jarvis Law Office, we guide you step-by-step, handle the details, and allow you to stay in control of your investments.

Don’t wait until it’s too late—get the personalized guidance you need to safeguard what matters most. Contact us here today to get started!

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October 7, 2024

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