Can I keep my savings if I go into a care home? The Financial Facts

With the annual median cost of a private room in a US nursing home projected to exceed six figures, the question of financial security is paramount for many seniors. This article addresses the common concern of whether can I keep my savings if I go into a care home? by exploring the rules governing asset protection.

Quick Summary

Care homes cannot legally seize your assets, but the high cost of care means your savings will be used to pay for services. Eligibility for government assistance like Medicaid is tied to strict asset and income limits, which may require you to strategically 'spend down' your wealth.

Key Points

• No Seizing of Assets: Care homes don't legally take your savings, but you are required to use them to pay for care services.

• Medicaid Requires Spend-Down: To qualify for Medicaid, you must spend down your assets and income until they fall below your state's strict limits.

• Look-Back Period is Key: Gifting assets within five years of a Medicaid application can trigger a penalty period of ineligibility.

• Irrevocable Trusts Offer Protection: An irrevocable trust, when established well in advance of care needs, can shield assets from Medicaid's eligibility calculations.

• Spousal Protections Exist: Special rules help protect a portion of the assets and income for the 'community spouse' to prevent financial ruin.

• Planning is Proactive: The earlier you begin planning with an elder law attorney, the more options you have to protect your savings from care costs.

The Reality of Paying for Care Home Costs

It is a common and understandable fear for many seniors: that their life savings will be entirely consumed by long-term care expenses. The reality is more nuanced. While no one will physically take your bank accounts, you are required to pay for the care you receive. For those with significant assets, this means paying privately until those funds are depleted to a certain level.

Two Primary Payment Paths: Private Pay vs. Medicaid

Understanding the two main avenues for funding long-term care is the first step toward effective financial planning. Your savings are managed very differently depending on which path you take.

Private Pay Explained

If your assets and income are above the threshold for government assistance, you will pay for care privately. This involves using your own funds, including personal savings, retirement funds, investments, and income sources. This path offers the most freedom in choosing a facility but can rapidly deplete savings.

Navigating Medicaid Eligibility

For those with limited income and assets, Medicaid is the primary payer for long-term care. To qualify, you must meet strict financial requirements, which vary by state. The asset limits are typically very low. This requires a 'spend-down' of your assets until you meet your state's eligibility limit, at which point Medicaid will cover costs.

Strategies for Protecting Your Savings

Proactive legal strategies can help protect your assets if you are planning for future care needs. It is crucial to start well in advance.

Understanding the Medicaid 'Look-Back' Period

Medicaid in most states has a five-year 'look-back' period, reviewing asset transfers made before application. Gifting assets within this period can result in a penalty period of Medicaid ineligibility.

The Role of an Irrevocable Trust

An irrevocable trust is a tool for protecting assets. Once assets are in this trust, you do not legally own them. If established more than five years before needing Medicaid, these assets are generally protected. This requires an elder law attorney's expertise.

Spousal Protection Rules

Medicaid offers protections for the spouse not needing care ('community spouse'). These rules allow the community spouse to keep a portion of assets and income, including the Community Spouse Resource Allowance (CSRA) and Minimum Monthly Maintenance Needs Allowance (MMMNA).

Smart "Spend-Down" Strategies

If spending down assets for Medicaid eligibility, consider permissible expenses that can benefit you. These can include pre-paying funeral costs, paying off debts, making home modifications, or purchasing exempt assets.

The Medicaid vs. Medicare Question

Medicaid and Medicare are often confused. Medicare is a federal program based on age or disability, primarily covering short-term skilled nursing stays. Medicaid is a joint federal/state program based on financial need, covering long-term custodial care. The table below highlights key differences.

Feature	Medicare	Medicaid
Funding	Federal program	Joint federal and state program
Eligibility	Primarily based on age (65+) or disability, not income/assets	Based on financial need (low income/assets)
Coverage	Short-term stays in skilled nursing facilities (post-hospitalization)	Long-term care in nursing homes and other facilities
Custodial Care	Does not cover long-term custodial care	Does cover long-term custodial care

What About My Home?

Your primary residence may be an exempt asset, especially if you intend to return. However, after your death, Medicaid may seek to recover care costs through Estate Recovery, potentially placing a lien on the home.

Conclusion: The Importance of Proactive Planning

Ultimately, whether you can keep your savings if you go into a care home depends on your financial situation and how early you plan. Care homes require payment for services, and costs are substantial. Combining private pay and strategic planning is often necessary. Consulting an elder law attorney early is the best approach to protect your financial security and ensure care needs are met. Resources like the National Academy of Elder Law Attorneys can help locate qualified professionals.

Frequently Asked Questions

Does Medicare pay for long-term care in a nursing home?

No, Medicare only covers short-term, medically necessary stays in a skilled nursing facility, typically following a hospital stay. It does not pay for long-term custodial care in a nursing home.

What is the Medicaid 'spend-down' process?

The 'spend-down' process is when an individual uses their assets and income to pay for care until they meet their state's Medicaid eligibility limits. Only after the spend-down is complete will Medicaid cover the remaining costs.

Can I give my assets to my children to avoid care costs?

Giving away assets within the five-year 'look-back' period before applying for Medicaid will result in a penalty period of ineligibility. This is a high-risk strategy that requires expert legal planning.

How does an irrevocable trust protect my savings?

By transferring assets into an irrevocable trust, you remove them from your name. If this is done more than five years before needing Medicaid, those assets will not be counted toward your eligibility limits.

What happens to my house if I go into a care home?

Your primary residence may be an exempt asset while you are living in a care home, especially if you intend to return. However, after your death, your state's Medicaid program may place a lien on the house to recover care costs through Estate Recovery.

What is a community spouse's resource allowance?

A Community Spouse Resource Allowance (CSRA) is a Medicaid rule that allows the healthy spouse of someone in a care home to keep a portion of the couple's assets, protecting them from financial hardship.

Is it ever too late to plan for care costs?

While starting early is best, it is rarely too late to explore options. Even in a crisis, an elder law attorney can often help find legal ways to protect some assets or structure a spend-down effectively.