Does a Nursing Home Take All Your Money?

The idea of a nursing home “taking all your money” is a common concern for many individuals and families. While long-term care costs are substantial, various rules and programs exist to prevent individuals from being completely stripped of their assets. Understanding these mechanisms, including asset protection strategies and government assistance programs, helps clarify how long-term care can be financed without depleting all personal resources.

The Reality of Nursing Home Costs

Nursing home care represents a significant financial commitment. These facilities provide comprehensive services, including room and board, personal care, skilled nursing, therapies, medications, and recreational activities.

The national median cost for a semi-private room in a nursing home was approximately $111,325 annually in 2024, while a private room could cost around $127,750 per year. These costs vary considerably based on geographic location and the specific level of care required, with some states having significantly higher or lower averages. Daily costs can range from approximately $175 in some southern states to as much as $1,000 in parts of Alaska or California.

Navigating Payment Options

Individuals utilize a combination of funding sources to cover nursing home expenses. Many people initially rely on private pay, drawing from personal savings, investments, and current income.

Medicare, the federal health insurance program for individuals aged 65 or older, has a limited role in covering nursing home care. It primarily covers short-term skilled nursing facility (SNF) stays for rehabilitation following a qualifying hospital inpatient stay of at least three consecutive days. Medicare Part A may cover 100% of the cost for the first 20 days in a SNF, provided specific medical necessity criteria are met. For days 21 through 100, a daily co-payment of $209.50 was required in 2025. Medicare does not cover long-term custodial care, which constitutes the majority of nursing home needs.

Long-term care insurance offers a private solution for financing extended care. This insurance covers costs associated with nursing homes, assisted living facilities, or in-home care, helping to protect personal assets. Policies vary in their coverage limits and benefit triggers, providing a pre-planned financial resource.

Medicaid, a joint federal and state program, serves as a primary payer for long-term nursing home care for individuals with limited income and assets. For eligible beneficiaries, Medicaid covers 100% of nursing home costs, including room, board, and medical supplies. Beneficiaries are generally required to contribute most of their income toward their care, retaining only a small personal needs allowance.

Medicaid Asset Rules and Exemptions

Medicaid has specific asset rules to determine eligibility for long-term care, identifying which assets are “countable” and which are “exempt.” Countable assets include liquid resources such as bank accounts, stocks, bonds, and certain real estate beyond the primary residence. The asset limit for an individual applying for Medicaid long-term care is typically around $2,000 in most states.

Several types of assets are exempt from this calculation, meaning they do not count against the eligibility limit:
A primary residence, if the applicant intends to return home, or if a spouse, minor child, blind or disabled child, or a caregiver child resides in the home. Some states may impose an equity limit on the home, but this often does not apply if a spouse or dependent lives there.
One vehicle, if used for transportation by the applicant or a household member.
Personal belongings and household goods, including furniture, appliances, clothing, and personal jewelry.
Irrevocable burial trusts or pre-paid funeral plans.
Small life insurance policies with a limited cash surrender value.

Protections are in place for married couples, known as spousal impoverishment rules, to prevent the “community spouse” (the one not in the nursing home) from becoming impoverished. The Community Spouse Resource Allowance (CSRA) permits the community spouse to retain a portion of the couple’s combined assets. In 2024, the CSRA ranged from a minimum of $30,828 to a maximum of $154,140, depending on state rules and the couple’s total assets. The Minimum Monthly Maintenance Needs Allowance (MMMNA) allows the community spouse to keep a certain amount of monthly income for living expenses, with the maximum allowance set at $3,853.50 per month in 2024.

Medicaid also employs a “look-back period” to review financial transactions. In most states, this period is 60 months (five years) immediately preceding the Medicaid application date. Any asset transfers made for less than fair market value during this period can result in a penalty period of Medicaid ineligibility. The length of this penalty is calculated by dividing the uncompensated transfer amount by the average daily or monthly cost of nursing home care in the state, known as the penalty divisor.

While assets may be protected during an individual’s lifetime, states are required to seek recovery for Medicaid long-term care costs from the individual’s estate after their death through Medicaid Estate Recovery. Recovery is generally deferred or may be exempt if the deceased Medicaid enrollee is survived by a spouse, a child under 21, or a blind or disabled child of any age. Certain assets, such as jointly owned property, life insurance proceeds with a named beneficiary, and assets held in specific types of trusts, may also be protected from estate recovery. States also have procedures for waiving estate recovery if it would cause undue hardship to surviving beneficiaries.

Strategies for Asset Protection

Proactive planning can significantly influence the extent to which assets are preserved when long-term nursing home care becomes necessary. Long-term care insurance remains a valuable planning tool, providing a dedicated financial resource that can cover a substantial portion of care costs. Purchasing a policy earlier in life often results in more affordable premiums and broader coverage options.

Gifting assets, while a straightforward method to reduce countable assets, must be undertaken with careful consideration of Medicaid’s 60-month look-back period. Transfers made within this five-year window for less than fair market value can trigger a period of ineligibility for Medicaid benefits. Such transfers require advance planning, ideally well before the potential need for long-term care arises, to avoid penalties.

Certain types of trusts, particularly irrevocable trusts, can be utilized for asset protection in long-term care planning. Assets placed into an irrevocable trust are generally no longer considered owned by the individual for Medicaid eligibility, provided the transfer occurred outside the look-back period. These trusts are complex legal instruments, and their effectiveness depends on precise structuring and adherence to specific rules.

Given the intricate and often state-specific nature of Medicaid regulations and asset protection strategies, consulting with elder law attorneys or financial planners specializing in long-term care planning is highly recommended. These professionals can provide personalized guidance, helping individuals and families navigate eligibility requirements, understand the implications of asset transfers, and develop tailored strategies to protect assets while securing necessary care. Their expertise helps in making informed decisions.