Protecting Assets from a Long-Term Care Event

Planning Ahead to Preserve Financial Security and Family Legacy

Living longer is, without question, a good thing. However, increased longevity also means that as individuals reach their 80s and 90s, they often become more frail and face a higher likelihood of needing long-term care. When a long-term care event occurs, the financial impact can be significant—and in many cases, devastating to a lifetime of savings.

The cost of care is substantial:

• Nursing home care: often ranges from $130,000 to $200,000 per year

• 24-hour private in-home care: can exceed $250,000 to $300,000 per year

Because of these costs, many individuals and families look for ways—well in advance—to plan for potential long-term care needs and protect assets from a forced spend-down process.

Why Planning in Advance Matters

Long-term care planning cannot be done after the fact. Once a care event has occurred, options become extremely limited.

In New York State, qualifying for Medicaid to cover long-term care expenses is subject to a five-year look-back period. This means that asset transfers made within five years of applying for Medicaid can result in penalties and delays in eligibility.

Without a plan in place:

• Families are often forced into crisis-mode decision making

• Assets may need to be rapidly spent down

• There may be little to no opportunity to protect wealth

• In some New York counties, Medicaid may place a lien on the primary residence

Proactive planning helps avoid these outcomes and can preserve assets for spouses, children, and other heirs.

Three Primary Strategies for Protecting Assets

There are three main planning strategies commonly used to protect assets from a long-term care spend-down. Each has different advantages, trade-offs, and timing considerations.

1. Medicaid Trusts

A Medicaid trust (often an irrevocable trust) is designed to hold assets outside of an individual’s personal ownership for Medicaid eligibility purposes.

Key characteristics:

• Assets placed in the trust are no longer personally owned

• When properly structured and funded outside the look-back period, assets may be protected

• Can help preserve assets for heirs

• Requires careful planning and coordination with an estate attorney

This strategy is often used for protecting homes and investment assets but requires relinquishing direct ownership.

2. Gifting Assets

Another approach involves gifting assets to children or other beneficiaries.

Considerations include:

• Gifts start the Medicaid look-back clock

• Loss of control over the gifted assets

• Potential gift tax and capital gains implications

• Exposure to the recipient’s creditors, divorce, or financial issues

While gifting can be effective in some cases, it carries risks that must be carefully evaluated.

3. Gifting with a Life Estate

A life estate allows an individual to transfer ownership of a property (often a primary residence) while retaining the right to live in the home for the rest of their life.

Benefits and considerations:

• Can reduce exposure to Medicaid spend-down

• Allows continued use of the property

• May preserve favorable tax treatment for heirs

• Requires careful legal structuring

• Still subject to look-back rules

Life estates can be a powerful tool, particularly for homeowners, when implemented properly and early.

Protecting Assets vs. Privately Paying for Care

Not every individual needs—or wants—to protect assets from a long-term care event.

For some clients, the discussion includes whether:

• They have sufficient assets to self-insure

• They value maximum flexibility in care decisions

• They prefer private-pay options over Medicaid facilities

• Asset protection aligns with their overall goals

There is no universal answer. The right approach depends on net worth, income, family structure, health history, and personal preferences.

The Decline of Traditional Long-Term Care Insurance

Long-term care insurance has become a less viable solution for many families.

Key challenges include:

• Dramatic premium increases over the past decade

• Difficult underwriting standards

• Limited availability of new policies

• In New York State, nearly all carriers have exited the market—with only one carrier currently writing new policies

• Lack of competition has driven costs even higher

As a result, many retirees have shifted toward:

• Self-insuring

• Asset protection strategies

• Medicaid-focused planning

Why Crisis Planning Rarely Works

When a long-term care event happens unexpectedly:

• Family members are often forced into a damage-control role

• Legal and financial options are limited

• Most assets may need to be spent before Medicaid eligibility

• Stress and emotional strain increase significantly

Unfortunately, once care is needed, there is often very little that can be done to protect assets.

Our Approach to Long-Term Care Planning

At our firm, we help clients:

• Understand the true cost of long-term care

• Evaluate whether asset protection or private pay makes sense

• Identify appropriate Medicaid planning strategies

• Coordinate with estate attorneys to implement trusts or life estates

• Integrate long-term care planning into retirement, tax, and estate plans

• Help clients and their family members avoid last-minute, crisis-driven decisions

A well-designed plan helps protect assets, preserve dignity, and reduce the burden on family members.

Contact Us . . . .

All of our services start with a complimentary consult. No high pressure sales tactics. We are financial planners, not salesmen.

About Our Firm:  Greenbush Financial Group is an independent registered investment advisory firm based in Albany, New York, that provides four main services to clients: fee-based financial planning services, investment management, employer-sponsored retirement plans, and retirement planning services.  The firm serves clients locally in the Albany region and virtually across the United States.

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