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 need to protect assets 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 probably do not need to worry about 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 costly).
  • 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 think asset protection is appropriate if:

  1. Passing on your hard-earned wealth to your descendants is very important to you. 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.