For many families, one of the biggest concerns about getting older is what happens if you or your spouse needs long-term care. Nursing home care is expensive, and the cost can quickly start eating into the savings you’ve spent a lifetime building. That leads to some pretty common questions. What happens to your home? What does your spouse get to keep? And is there anything you can do now to protect what you’ve built?

What to Think About Before You Decide

Long-term care planning isn’t just about protecting your assets. Every option comes with tradeoffs. Some strategies need to be put in place years before you need care, while insurance generally gets harder to qualify for as your health changes. A trust may help protect certain assets, but it also means giving up some control over them.

What you own matters too. Your home, retirement accounts, and other savings aren’t necessarily treated the same way, and there are additional protections to consider if you’re married. That’s why there’s no one-size-fits-all answer. The right approach depends on your financial situation, your family, your health, and, perhaps most importantly, how early you start planning.

Questions We Hear All the Time

Is my house safe from a nursing home?

In many cases, your home is treated differently from your other assets, especially if your spouse is still living there. But being able to keep your home while you’re receiving Medicaid doesn’t necessarily mean it’s protected forever. After you die, the state may be able to seek repayment for certain Medicaid benefits from your estate. There are exceptions, and the rules vary by state, which is why the home should be looked at separately as part of your overall plan.

Can I just give money to my kids instead of using a trust?

You can, but giving assets directly to your children comes with some risks. The transfer can still fall within Medicaid’s look-back period, and once the money is in your child’s name, you no longer control it. It could also become exposed to things happening in their life, such as a divorce, lawsuit, or financial trouble. A properly structured trust may provide more protection while still accomplishing the same planning goal.

How far ahead do I need to set up a trust for it to work?

Ideally, at least five years before you need to apply for Medicaid. Medicaid generally looks back at certain transfers made during the five years before you apply. If you transfer assets to a trust during that period, it can result in a penalty that delays your eligibility for benefits. There are exceptions, but the earlier you start planning, the more options you’re likely to have.

What happens if I need care before the trust’s five years are up?

This is where things can get complicated. If you apply for Medicaid before the five-year look-back period has passed, the assets you transferred may still be counted when determining your eligibility and could result in a penalty period. During that time, you may need to cover the cost of care another way. It doesn’t necessarily mean all is lost, but your options may be more limited, which is why planning early matters.

Is long-term care insurance worth it if I might never need it?

That’s one of the biggest concerns people have with long-term care insurance. Traditional coverage can feel like something you’re paying for that you may never use. Hybrid policies offer another option by combining long-term care benefits with life insurance or an annuity. If you never need long-term care, there may still be a death benefit or other value that passes on to your family. There are tradeoffs to both approaches, and what makes sense depends on your age, health, financial situation, and what you’re trying to accomplish.

What does my spouse get to keep if I need nursing home care?

If you’re married, your spouse generally doesn’t have to spend down everything just because you need nursing home care. Medicaid has rules designed to protect the spouse who remains at home, which may allow them to keep the house, a vehicle, personal belongings, a portion of the couple’s other assets, and certain income. The exact amounts vary by state and change over time, so this is an area where it’s important to look at your specific situation.

Can they come after my spouse’s retirement account if I go into a nursing home?

It depends on where you live. Medicaid rules for a spouse’s IRA, 401(k), or other retirement accounts vary by state. In some states, those accounts may be protected, while in others they may be considered when determining Medicaid eligibility and how much your spouse can keep. Because the rules can be very different from one state to another, retirement accounts need to be looked at carefully as part of the overall plan.

Can I move my IRA into a trust to protect it like my other savings?

Not as easily. IRAs and other retirement accounts have their own tax rules, and moving an IRA into an irrevocable trust during your lifetime can trigger significant income taxes. That’s why retirement accounts usually need to be handled differently from your home, investment accounts, and other assets when putting together a long-term care plan

The Bottom Line

There’s no single strategy that works for every family. The right approach depends on your assets, health, family situation, state of residence, and how much control and flexibility you’re willing to give up. What matters most is planning before a health event forces the decision. Long-term care planning often works best when your financial advisor, elder law attorney, and tax professional are working together. Starting the conversation early gives you more time to understand your options and build a strategy around what matters most to you.

Sources: Medicaid Eligibility Policy- Medicaid.gov
PA Medicaid and Payment of Long-Term Care Services
PA Medical Assistance Estate Recovery Program

Medicaid asset limits, look-back periods, estate-recovery rules, and the treatment of spousal and retirement assets vary by state and may change periodically. This information is provided for general educational purposes only and should not be construed as legal, tax, or individualized financial advice. Please consult a qualified elder law attorney or tax professional regarding your specific situation. For more information, please visit alliancewealthadvisors.com/legal-disclosures