What is asset protection? Can I protect my property from the nursing home?

The greatest financial risk every retiree faces is the enormous cost of long-term care in assisted living, memory care, or a nursing home. These facilities can cost $5,000-10,000 per month, and costs are always rising. Nearly a third of all people turning age 65 will need long-term care, deplete their assets, and then need Medicaid to pay for it. If you’ve spent all your resources on long-term care, nothing remains for your family. Asset protection ensures your property is preserved for your beneficiaries, rather than being spent on long-term care.

It’s important to understand a number of things about asset protection:

  • You protect assets by putting them into a lawyer-drafted irrevocable trust. You must hire a lawyer to do this properly.
  • To protect an asset, you must give up your access to it permanently and irrevocably. You cannot use a protected asset for your own support or general welfare.
  • You do not usually need to protect assets just for your spouse. The Medicaid laws already allow spouses to keep assets for their own needs, and an elder law attorney can help a spouse keep even more with careful planning.
  • When you protect assets, you are relying on Medicaid to pay for any long-term care those assets would have paid for. This might limit your care options, complicate your care, and impose extra work on your family. If you have long-term care insurance, you have less of a need for asset protection.
  • Asset protection is best done at least 5 years before needing long-term care (it’s possible to do it last-minute, but costlier).
  • The law can change everything very suddenly. It has in the past. Keeping your asset protection plan up to date is essential.
  • You cannot protect assets you already owe to a creditor.

Asset protection is not a magical solution. It guarantees that future generations will benefit from your property—a big deal. But it has significant costs.

Given the benefits and costs, I generally think asset protection is appropriate if:

  1. Passing on your property to your descendants is more important to you than keeping the property available for your own needs. You hate the idea of not leaving a penny to your kids or grandkids.
  2. You want to preserve specific, generational assets for your family, like the family cabin, farm, or business.

Note: Asset protection works particularly well for real estate, because you can continue to live in and use real property in an asset protection trust.