The Basics of Asset Protection Plan

Asset Protection Planning

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Medicare only covers short-term nursing home care. After that, Medicaid kicks in for qualified individuals. The Medicaid program only allows a person to have two or three thousand dollars in assets, depending on the state, to be eligible for coverage. An asset protection plan helps ensure that seniors qualify for Medicaid while also preserving some of their assets. Asset protection is an important part of estate planning to ensure that Medicaid is an option while still having something to leave behind for family members. Basic nursing home care can cost $10,000 per month, so without a long-term care policy or significant savings, qualifying for Medicaid is essential. 


Some property is exempt from the asset cap, such as a primary residence, and each state has its own value ceiling. Any pre-paid, non-refundable burial arrangements are also considered exempt, and this value also varies by state. The goal of asset protection planning is to minimize countable assets, meaning the assets that are subject to the asset cap.

Irrevocable Asset Trust

By placing assets in an irrevocable trust, they become under a trustee’s control and are not considered countable assets for purposes of Medicaid qualification. However, there is a five-year lookback period, so an estate planning lawyer will encourage starting this process long before Medicaid is needed. Otherwise, the assets will be subject to a penalty period, in months, equal to the value of countable assets divided by the regional monthly nursing home rate. Once that period has passed, the individual will be eligible for Medicaid. In the interim, the cost of long-term care will be out of pocket.

Life Estate

A life estate names a person as a tenant in their own home until the end of their life and gives another individual an ownership interest until then and full ownership afterward. It is an easy way to pass along the real property, usually a home, outside the probate process. Like the irrevocable asset trust, the life estate also has a five-year lookback period, so the sooner it is established, the better. If you end up having to go through the probate process though, consider contacting a probate lawyer Bergen County, NJ such as Kaplan Law Practice.

An asset protection plan is just one area of estate planning, but a very important one. A variety of protection vehicles can be used, such as an irrevocable asset trust and a life estate. An experienced estate planner has more tools than these at his disposal. Contact an estate planning attorney to find out what other options are available.