Can I Use A Trust To Protect Assets From Future Nursing Home Costs?
Asset protection is one of the most important parts of the estate planning process. Perhaps the biggest threat to your assets is future long-term care needs. When used proactively, trusts can help to protect your wealth from these costs. Here, our Norwood estate planning lawyer explains the key things to know about protecting assets from future long-term care costs.
Big Risk: The High Cost of Long-Term Care in Massachusetts
The cost of nursing home care in Massachusetts is among the highest in the nation. Even a relatively short period of long-term care/nursing home care can quickly eat away at your entire life’s savings. According to the Genworth Cost of Care Survey for 2025, the average annual cost of a private room in a Massachusetts nursing home exceeds $130,000. Even semi-private rooms approach $115,000 per year on average. It is a startling figure. These figures are well above the national average, and they highlight the severe financial risk families face if they need long-term care. Without proper planning, your savings could evaporate.
Irrevocable Trusts as a Medicaid Planning Tool
There is good news: Trusts can help you protect your assets against the costs associated with future long-term care needs and/or nursing home care needs. With that being said, you need to have the right trust set up at the right time. It also needs to be properly funded. A common misconception is that revocable living trusts automatically protect assets from nursing home costs. In reality, Massachusetts Medicaid (MassHealth) treats the assets in a revocable trust as available resources, whether they have been in the trust for three years, five years, ten years or twenty years
On the other hand, an irrevocable trust can provide protection in that countable assets, that would have needed to be spent down on care had this type of planning not been done, are exempt or not counted in determining eligibility. Magic does come at a price in that you give up direct control of the assets, that is, you cannot use the principal or original value of the assets transferred into the trust to support you and your family, but you are entitled to the income earned during a calendar year. And, while the trust terms generally cannot be changed, careful drafting by an experienced elder law attorney can allow for changes or modifications to certain areas of the trust, such as the residuary distribution at the death of the trustmaker(s).
While there are drawbacks in terms of the trust being irrevocable and limited to income-only distributions, irrevocable Medicaid trust can provide peace of mind knowing that the assets in the trust will not be depleted on long term care costs and preserved for creating a family legacy. This assumes that assets are actually transferred to the trust and the requisite five year look-back period has passed. As stated above, funding is key. If at any time after this look-back period has passed and skilled care is needed, and provided the trust has been properly managed by the Trustee with no invasion of principal, the assets are no longer counted as available resources for Medicaid eligibility.
What to Know About the Medicaid Five Year Lookback Period
MassHealth is the Medicaid program in Massachusetts. A key thing to know about MassHealth and long-term care is that the state agency enforces a five-year lookback period for eligibility. In other words, when you apply for nursing home coverage, the state reviews all asset transfers made within the past 60 months. If you transferred property for less than fair market value during that time, MassHealth may impose a penalty period and that can delay your eligibility for benefits. The rule is designed to prevent people from giving away assets at the last minute to qualify for Medicaid.
Tip: You should set up a trust to protect your assets from long-term care costs at least five years before you actually need care.
Call Our Norwood, MA Estate Planning Attorney for Asset Protection Today
At Fisher Law LLC, our Massachusetts estate planning attorney is committed to helping people and families protect their assets. If you have any questions about trusts, please do not hesitate to contact us today for a completely confidential consultation. With an office in Norwood, we provide asset protection services throughout the Greater Boston area.
Source:
investor.genworth.com/news-events/press-releases/detail/1010/long-term-care-costs-increase-in-massachusetts-exceeding
