With the rising cost of long-term care, many Californians are understandably concerned about how a nursing home stay could impact their savings, home, and other hard-earned assets. One of the most commonly asked questions in estate planning is: Can a trust help protect my assets from being used to pay for nursing home care? The answer is yes—but with important considerations and proper planning.
Understanding the Risk
Nursing home care in California can easily exceed $100,000 per year. Without proper planning, these costs can quickly deplete a person’s estate. While some individuals pay out-of-pocket, others seek assistance through Medi-Cal, California’s Medicaid program, which can cover long-term care for eligible residents. However, Medi-Cal has income and asset limits, and if you exceed those, you could be required to spend down your estate before qualifying.
The Role of Trusts in Asset Protection
Certain types of trusts, particularly irrevocable trusts, can be powerful tools in protecting your assets from nursing home expenses while maintaining eligibility for Medi-Cal. Here’s how they work:
- Irrevocable Medi-Cal Asset Protection Trust: Assets placed in this type of trust are no longer considered your personal property. This can help you meet Medi-Cal’s asset threshold. However, this strategy must be implemented early—California uses a 30-month “look-back period” to examine asset transfers.
- Home Protection: Your primary residence may be exempt under Medi-Cal while you’re alive, but after death, the state can recover costs from your estate. Placing your home in an irrevocable trust can help avoid this recovery and preserve the property for your heirs.
It’s important to note that revocable living trusts, while beneficial for avoiding probate and maintaining privacy, do not shield assets from nursing home costs or Medi-Cal recovery. Only irrevocable trusts offer that level of protection.
Proceed with Caution
Transferring assets into a trust has legal and tax consequences. Improperly structured trusts or last-minute transfers could jeopardize eligibility and trigger penalties. That’s why it’s critical to work with an experienced estate planning attorney who understands both federal and California-specific Medi-Cal rules.
To better understand common estate planning mistakes to avoid, read our blog: 5 Mistakes to Avoid When Updating Your Estate Plan.
For more on Medi-Cal and long-term care coverage, visit the California Department of Health Care Services.
Secure Your Legacy with a Proper Plan
If you’re concerned about how a nursing home stay might affect your estate, now is the time to act. The earlier you plan, the more options you have available to protect your assets and provide peace of mind for you and your family.
At Lowthorp, Richards, McMillan, Miller & Templeman, our attorneys can help you explore the right trust strategies for your long-term care planning. Call us at (805) 981-8555 or fill out our online contact form. We serve clients throughout Ventura, Santa Barbara, and San Luis Obispo Counties.