Asset Protection If a Spouse Goes into a Nursing Home

Many people plan carefully for their financial needs in retirement but often overlook how a disability could impact their situation. Unfortunately, disability is one of the leading reasons individuals require nursing home care. Understanding Medicaid laws can help protect assets if your spouse enters a nursing home or needs long-term care.

Consult a financial advisor for valuable guidance tailored to your specific situation.

What Happens to Your Assets When Your Spouse Goes into a Nursing Home?

If your spouse moves into a nursing home, they may qualify for Medicaid to cover their care.

Eligibility depends on your state and your spouse’s assets. Medicaid generally treats assets owned by either spouse as joint resources for this calculation. This applies even if the title is in only one name.

The community spouse, or the spouse remaining at home, typically may retain up to half of the couple’s assets. This provision is the Community Spouse Resource Allowance (CSRA). It allows you to keep up to $162,660 from shared assets in 2026. ¹

The community spouse is generally not required to contribute to nursing home costs unless their income exceeds specific limits. This is regardless of employment. However, if the community spouse has low income, they may be eligible for some of the institutionalized spouse’s income.

There are asset protection strategies beyond the standard legal protections to help protect assets in these situations.

What Is the Minimum Monthly Maintenance Needs Allowance (MMMNA)?

The calculation determining how much money a community spouse keeps is called the minimum monthly maintenance needs allowance (MMMNA).

Medicaid’s spousal protection laws stipulate a minimum amount for each state, with a $4,066.50 monthly maximum:

• Alaska: $3,381.25
• Hawaii: $3,111.25
• Remaining 48 states (including the District of Columbia): $2,643.75

The government does not count this as income when deciding if the institutionalized spouse qualifies for Medicaid.

Five-Year Lookback

Suppose you or your spouse are applying for Medicaid but gifted assets to family members in the last five years. Gifts may make the spouse in the nursing home ineligible for a certain period. You may be ineligible depending on the value of the assets and the state’s average rate for nursing home care.

However, you can avoid this. By planning in advance, you can maximize the dollars available to both you and your spouse in this situation.

How to Protect Assets If Your Spouse Goes into a Nursing Home 

Even if your spouse goes into a nursing home, you don’t have to tap your hard-earned savings and retirement accounts.

These four strategies can help you continue to benefit from your nest egg while using Medicaid to pay for nursing home expenses.

1. Buy a Medicaid-Compliant Annuity

A Medicaid-compliant annuity can help an institutionalized spouse qualify for Medicaid.

Paying for an annuity can deplete a couple’s resources, which may not be a disadvantage in this situation. This means the institutionalized spouse has fewer reportable assets, making them more likely to be eligible for Medicaid assistance.

Additionally, the community spouse will receive monthly payments from the annuity to use however they like.

2. Draft a Life Estate for Your Real Estate

A life estate legally gives ownership to one spouse while giving the other spouse remainderman status. This means they are designated to receive the property upon the spouse’s death.

Once in effect, a life estate stops state governments from trying to take the property. Whether the spouse passes away at home or in a nursing home, the remainderman inherits the property.

Be aware, however, that a property transfer through a life estate counts towards Medicaid’s five-year look-back period. If the institutionalized spouse passes away within five years of drafting a life estate, the rules change. The community spouse may be subject to a penalty if the remainder interest is a gift. 

3. Purchase Long-Term Care Coverage

Long-term care insurance helps couples meet expenses for an institutionalized spouse with a chronic health condition or problem that renders them unable to care for themselves. However, this coverage is more expensive when purchased later in life. You may never use it if you or your spouse doesn’t enter a nursing home.

That said, buying long-term care insurance can shrink your assets while helping your spouse get Medicaid assistance.

4. Shelter Assets With an Irrevocable Trust

An irrevocable trust – or in this case, a Medicaid trust – may help you remove some assets from your estate.

Ceding control of a significant portion of your assets should only occur for a few reasons:

• Keeping assets from creditors
• Reducing taxes
• Becoming eligible for government assistance

Any wealth and assets assigned to an irrevocable trust will not count toward Medicaid qualification. However, it must be placed in the trust at least five years prior. Therefore, irrevocable trusts can help you qualify for government assistance with nursing home costs.

However, you should only create an irrevocable trust after considering the pros and cons. You’ll be giving control of most or all of your wealth to a trustee.

For example, say you want to sell your home and downsize. You will need your trustee to sign off on it. You will also likely lose access to the trust’s funds and only receive income from the trust’s principal.

A Word of Caution for Protecting Your Assets

How much income a community spouse receives varies by state. Each minor or dependent child living with the community spouse allows a 33% increase to the monthly amount.

The Omnibus Budget Reconciliation Act of 1993 allows Medicaid to pursue repayment from your estate for nursing home expenses after your death. When you don’t appropriately shelter your assets, they’re available for seizure. This could leave your intended beneficiaries empty-handed.

There are specific tax rules for asset transfers. In 2026, gifts above $19,000 to any one person require filing Form 709, a gift tax return with the IRS. ²

However, filing does not automatically mean tax is due. These rules operate independently of Medicaid eligibility and often create confusion when families consider gifting strategies.

Medicaid applies its own restrictions through a five-year look-back period. The program reviews gifts and asset transfers made within five years of applying for benefits. This is regardless of whether they trigger tax filings.

Transfers during this period may result in a penalty delay before Medicaid coverage begins. This can leave applicants responsible for care costs during that time.

How to Start Planning Before a Crisis Hits

There are several factors to consider when planning for Medicaid and long-term care.

Timing

When it comes to protecting assets from nursing home costs, timing is often more important than the strategy itself.

Many of the most effective planning tools only work if they are in place years before care is necessary. Once a spouse enters a nursing home or receives a diagnosis making long-term care likely, the number of available options can shrink dramatically.

Five-Year Look-Back Period

One reason is Medicaid’s five-year look-back period.

Asset transfers made within five years of applying for Medicaid can trigger penalties that delay eligibility. As a result, strategies involving gifts, irrevocable trusts and other asset transfers generally work best before a health crisis arises.

Ownership

A good starting point is to take inventory of your assets to better understand ownership. Medicaid treats jointly owned assets, individually owned assets, retirement accounts and certain exempt assets differently.

Knowing how Medicaid evaluates your assets today can help identify potential vulnerabilities and planning opportunities.

Long-Term Care Insurance

Long-term care insurance is another option that becomes more difficult to obtain with age. Coverage is generally less expensive and easier to qualify for in your 50s or early 60s. Waiting until health problems develop can lead to higher premiums, limited coverage options or a denied application altogether.

Legal Planning

Legal planning is equally important. If an irrevocable Medicaid trust is part of your strategy, establishing it early can satisfy the five-year look-back clock. You should also complete durable powers of attorney, healthcare directives and other estate planning documents before they are necessary. Without them, family members may need court approval to make financial or medical decisions on behalf of an incapacitated spouse.

A financial advisor and elder law attorney can help you evaluate your assets, estimate long-term care costs and determine the right planning strategies. Starting early generally provides more flexibility and more options. It gives a better chance of preserving assets for both spouses and their heirs.

Bottom Line

Planning ahead for potential nursing home care is essential for protecting your assets as you age. If it happens, there are ways to retain your wealth and property by taking action well in advance. From long-term care insurance coverage to the right annuity, there are ways to better prepare yourself if this happens to occur.

This type of planning becomes especially important when Medicaid may eventually play a role in covering care costs.

“Medicaid can help cover some gaps in financial coverage for couples where one spouse is living in a nursing home. If you or your spouse are likely to need nursing home care in the next five years, meet with a fiduciary advisor to discuss how you can best organize your assets to provide for both spouses,” said Tanza Loudenback, CFP®.

Tanza Loudenback, Certified Financial Planner™ (CFP®), provided the quote used in this article. Please note that Tanza is not a participant in SmartAsset AMP, is not an employee of SmartAsset and has been compensated. The opinion voiced in the quote is for general information only. It is not intended to provide specific advice or recommendations.

Tips on Retirement Planning

• A financial advisor may be able to help you find long-term care options. Finding a qualified financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
• Retirement and long-term care planning aren’t always easy. For help, check out SmartAsset’s Retirement tax calculator which can help you determine the friendliest state to retire in, from a tax perspective.
• It can be confusing trying to figure out how much money you need to have saved at any given time so that you’ll have enough for retirement. You can check out our resource on the average retirement savings by age to learn more and gauge how close you are.

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