A nursing home cannot take your savings, home or other assets. Aside from a general ability to sue you for unpaid bills, nursing homes have no right or ability to simply seize what is yours.

That said, financing care in a nursing home can drain your savings quickly enough that it makes little difference. Whether you pay directly or rely on Medicaid, staying in a nursing home can require most or even all of your assets.

For example, let’s say you have $450,000 in an IRA and a home worth the median $420,000. Here’s what you should think about when it comes to paying for a nursing home. You might also want to consider using this free tool to match with a financial advisor who can offer more personalized guidance.

Nursing Home Costs

Nursing homes are residential care facilities. This means that you live there and receive 24-hour access to medical staff. The extent of this care varies based on the facility, ranging from on-call nursing staff to round-the-clock attention from doctors.

In all cases, these facilities are expensive. The exact costs range widely based on where you live, but the median cost of one year in a nursing home is around $108,000. This is between three and five times the average income of a retiree household, meaning that it’s almost impossible for most people to pay these costs out of pocket.

Some households can prepare for these costs with long-term care insurance. This is a form of insurance that covers residential care like a nursing home. The challenge is that the premiums aren’t cheap. Even if you buy coverage early, you can expect to pay an average $2,200 or more per year, making this expensive in the short-term, but possibly cheap in the long-term. And if you don’t buy early when you are younger and healthier, this insurance will cost more.

If you cannot pay out of pocket and do not have long-term care insurance, the other option is typically Medicaid.

Medicaid, Medicare and Nursing Homes

Medicaid and Medicare are the two main government health care programs in the United States.

Medicare is a general health insurance program available to most Americans age 65 and older. While it covers a wide variety of treatment options, it does not offer coverage for long-term or residential care. The closest available coverage offered by Medicare is a short-term stay related to specific treatment and recovery.

Medicaid is a means-tested health insurance program available to most Americans who meet the program’s financial eligibility requirements. Broadly, this means that your household income and assets must fall below certain thresholds to qualify for coverage. Since Medicaid is partially administered by each state, these requirements vary between jurisdictions.

Unlike Medicare, Medicaid does cover long-term and residential care. This includes staying in a nursing home.

However, Medicaid’s eligibility requirements are strict. In most states, you must have a household income less than 200% of the federal poverty guidelines, and you must own total countable assets of no more than $2,000. This asset limit applies to almost all significant holdings, such as investments, retirement accounts, cash and real estate, although most states exempt some forms of property such as general personal possessions, primary vehicles and primary residences.

Can a Nursing Home Take Your Savings?

This brings us back to our headline question: Can a nursing home take your savings? Here, you have $450,000 in an IRA and a home which we will value at $420,000 (the current average price of a house, according to the Federal Reserve).

The short answer is no. Nursing homes do not have a generalized ability to seize your assets, and this includes cash, portfolios and real estate. Now, your individual circumstances may vary. For example, a nursing home might have the ability to seize your assets if you sign a contract to that effect or if they successfully sue you for unpaid bills. However, in general, the worst thing a nursing home can do is evict you.

The long answer is more complicated though, because while a nursing home cannot take your savings, this care can certainly cost you your savings. This is true whether you pay out of pocket or rely on Medicaid.

Here, for example, you have a combined $870,000 in total assets between your IRA and your home equity. Out of pocket, at median prices, that will pay for just over eight years of care. You have some options beyond simply liquidating your assets, such as home equity loans rather than selling your property outright for example. The potential returns on your IRA will also change these numbers, as will the taxes you pay on portfolio withdrawals, but in all these hypothetical cases, a long-term stay will eventually drain your savings.

Whether this plan works for you depends significantly on when you enter a nursing facility. If you need care toward the end of your life, you may have more than enough in savings to pay for your stay. Otherwise, you may need to make another plan.

Then there’s Medicaid. To qualify for long-term care through Medicaid, you would need to meet the program’s income and asset limits. This means that your monthly income cannot exceed your state’s requirements, in most states around $2,901 per month per individual ($5,802 per month for a married couple). This includes Social Security benefits. Your total household assets must also not exceed your state’s total asset requirements, typically between $2,000 and $4,000 after exemptions.

Here, your assets significantly exceed the standard Medicaid limits. To qualify, you will need to spend, gift and otherwise transfer your assets away until you fall within the program’s limits. And there are a lot of nuances to doing so. This returns us to our long answer, because while a nursing home cannot take your assets, you would still need to get rid of them to qualify for Medicaid.

Consider speaking with a financial advisor if you need professional input on your retirement plan and expenses.

Medicaid and Your Assets

There are some ways to manage Medicaid requirements. Readers should again note that Medicaid is state-by-state. While these rules apply to most states, make sure to check the laws in your jurisdiction.

If your assets exceed local Medicaid limits, as they will almost certainly do here, you must do what’s called a “spend-down.” This is when you spend or otherwise transfer out your assets, until you meet the program’s requirements. Once your income and assets meet the Medicaid limits, you can qualify for nursing home care coverage.

There are ways to manage this though. The first thing to understand is that there are several exemptions to the countable assets rule. Most states exempt your primary vehicle and your personal property, for example, so they won’t tally your clothes, jewelry or furniture. Medicaid also heavily discounts your primary residence as well. If you have a spouse who continues to live at home, your home generally doesn’t count as a Medicaid asset at all. If not, your primary residence is generally exempted up to a maximum amount of home equity (typically between $750,000 and $1 million).

Different income and asset limits also apply to married couples when one spouse is not applying for Medicaid.

The income limit, for example, does not apply to a non-applicant spouse. They can typically make any amount, so long as your income remains within the limit. The total asset limit is also different for a non-applicant spouse. States allow a non-applicant spouse to retain a wide range of assets, from around $150,000 in total wealth for some states to no meaningful limit in other states.

If the exemptions and spousal exceptions do not address your needs, then you might need to give away (“spend down”) your assets to qualify for Medicaid. To manage this, many people rely on trusted third parties or non-revocable trusts. If you give everything to a friend or family member, they can hold your property for your benefit. For example, they could manage your retirement funds and spend the money on your behalf. Or they could hold real estate and let you continue to use it. However, consulting with a professional is prudent for such cases.

Otherwise, you can establish an irrevocable trust. Trusts are legal entities that own any assets they receive, so giving assets to a trust has the same legal effect as giving it to another person. After the transfer, these assets no longer belong to you. This allows you to reduce your household net worth for the purposes of Medicaid eligibility. As the founder of the trust, you can also set up its terms and make yourself a beneficiary. You can direct the trust and its trustees to spend or manage assets on your behalf, giving you some benefit from these assets while also meeting Medicaid’s requirements.

Here, for example, you might set up a trust with yourself as the named beneficiary. Then, you could transfer your $450,000 IRA into the trust, giving the trustee instructions to spend or transfer those assets for your benefit based on the state’s Medicaid limits.

You must use a non-revocable trust. In order to qualify for Medicaid, you will have to entirely surrender these assets, meaning that you cannot have any continued rights to them. So make sure to plan very carefully, because once you make this transfer it cannot be undone. What’s more, make sure to plan around Medicaid’s five year lookback rule. Under this rule, your Medicaid eligibility is based on your assets as of five years ago. So, for example, say that you apply for Medicaid in 2024. The program will review your assets and income going back to 2019, so make sure you begin making plans at least five years in advance of your needs.

These matters can get complicated quickly. If you’re interested in professional input for appropriately situating your own estate, talk to a fiduciary financial advisor today.

The Bottom Line

A nursing home cannot take your savings and assets, but the costs associated with staying in one can quickly drain your savings if you’re not careful. Plan around your long-term needs, and consider using a trust if you will rely on Medicaid, otherwise it can be easy for long-term care to cost you everything.

More Tips

You cannot over plan for long-term care. While not everyone will need this, if you do need care such as a nursing home it’s too late to plan for this if you’re already well into retirement. So here’s how to make sure this won’t catch you by surprise.
A financial advisor can help you build a comprehensive retirement plan. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
Keep an emergency fund on hand in case you run into unexpected expenses. An emergency fund should be liquid — in an account that isn’t at risk of significant fluctuation like the stock market. The tradeoff is that the value of liquid cash can be eroded by inflation. But a high-interest account allows you to earn compound interest. Compare savings accounts from these banks.
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