Do Trusts Protect Assets from Nursing Home Costs?~4 min read

Some irrevocable trusts may help protect assets from nursing home costs in Texas if they are created and funded at least five years before you apply for Medicaid. Revocable living trusts do not provide this protection.

Why Nursing Home Costs Affect Your Assets

If you need long-term nursing home care in Texas, the cost can be significant. Many families rely on Medicaid to help pay for that care. Medicaid is a need-based program with strict income and asset limits.

If assets are in your name, such as savings, investments, or real estate other than your homestead, those resources may need to be spent before Medicaid will help. This is why many people ask whether a trust can protect what they have worked for.

Why Revocable Trusts Do Not Protect Assets

A revocable living trust is commonly used in estate planning to avoid probate and manage assets during your lifetime. However, it does not protect assets from nursing home costs.

Because you still control and can access assets in a revocable trust, Medicaid treats those assets as yours. For eligibility purposes, they are counted the same as if they were in your individual name.

Types of Trusts That May Protect Assets

Some irrevocable trusts may help protect assets from nursing home costs because you give up ownership and access to the principal. Once properly structured and funded, those assets may no longer be counted for Medicaid after the five-year look back period.

Depending on your goals and family situation, planning may involve different forms of irrevocable trusts, such as a Medicaid asset protection trust, an income only trust, or certain trusts used in spousal or disability planning. Each type limits your control in specific ways so the assets are not counted as yours for Medicaid purposes.

The Five-Year Look back Rule in Texas

Texas Medicaid reviews financial transfers made during the sixty months before you apply for nursing home benefits. This is called the five-year look back period.

If you transfer assets into an irrevocable trust during that time, Medicaid may impose a penalty period. During the penalty period, Medicaid will not pay for your care even if you otherwise qualify.

Because of this rule, trusts intended to protect assets are usually created and funded at least five years in advance.

What Trust Planning Can and Cannot Do

Trust planning may help preserve certain assets for your spouse or children and reduce what must be spent on long-term care. It can also help protect real estate or investments that are not otherwise exempt.

However, transferring assets into a trust shortly before entering a nursing home will not create protection. Once care is needed soon, planning options become limited.

Planning earlier in life gives you more opportunity to structure protection in a way that aligns with your goals.

Contact Springer, Lyle & Dameron

If you are thinking about how future nursing home costs could affect your assets, early planning can make a meaningful difference for you and your family. The attorneys at Springer, Lyle & Dameron work with Texas families to evaluate long-term care planning strategies, including whether certain irrevocable trusts may be appropriate based on your goals and timing.

To learn more or schedule a consultation, contact Aubry Dameron at 940-387-0404 or contact us online. Thoughtful planning today can help protect what you want to pass on tomorrow.

Springer, Lyle & Dameron is located at 1807 Westminster, Denton, TX 76205.

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Frequently Asked Questions

Does a revocable living trust protect my assets from a nursing home?
No. Assets in a revocable living trust are still considered yours for Medicaid eligibility in Texas.

What type of trust protects assets from Medicaid?
Certain irrevocable trusts that remove your control and access to principal may protect assets after the five-year look back period.

Can I put my home in a trust to protect it?
Your Texas homestead is often already exempt while you are living. Other real estate may be placed in certain irrevocable trusts as part of long-term care planning.