Last month, Maria sat in my office with tears in her eyes. She'd just received her father's nursing home bill—$12,000 per month. "I thought Medicare would cover this," she told me. "Now we're looking at selling the family home just to pay for his care."
Maria's situation isn't unique. In fact, it's heartbreakingly common. The average cost of long-term care in New York can easily exceed $150,000 per year, and most families have no idea how vulnerable their life savings really is until it's almost too late.
If you're lying awake at night worrying about how one serious illness could wipe out everything you've worked for, you're not alone. But here's the good news: with proper planning, you can protect your family's assets while still ensuring access to quality medical care. Let me walk you through the strategies that actually work—and the critical mistakes you need to avoid.
Understanding the Real Threat to Your Assets
Before we talk about solutions, let's be honest about the problem. Medical costs—particularly long-term care expenses—represent one of the single biggest threats to middle-class wealth in America today.
Medicare doesn't cover most long-term care. Many people assume they're protected because they've paid into Medicare their entire working lives. The reality? Medicare only covers short-term skilled nursing care following a hospitalization, typically for up to 100 days. After that, you're on your own.
Medicaid does cover long-term care, but there's a catch: you generally need to deplete most of your assets first. In New York, you can only keep about $31,175 in countable assets as an individual (2025 limits). Everything else—your savings, investments, and sometimes even your home—must be spent down before Medicaid kicks in.
This is where strategic planning becomes essential. The families who protect their assets aren't the wealthiest ones—they're the ones who plan ahead.
The Five-Year Rule That Changes Everything
If there's one thing you take away from this article, let it be this: Medicaid has a five-year "look-back" period for asset transfers.
What does this mean? If you give away assets or transfer them for less than fair market value within five years before applying for Medicaid, you could face a penalty period where you're ineligible for benefits. The penalty is calculated based on how much you transferred divided by the average monthly cost of nursing home care in your region.
This look-back period is precisely why early planning is so critical. The strategies that work best need time to mature. Think of asset protection like planting a tree—the best time to start was five years ago, but the second-best time is today.
I've had clients come to me in crisis mode, needing nursing home care immediately with no planning in place. We can still help, but the options are more limited and often more expensive. Don't let that be your story.
Medicaid Asset Protection Trusts: Your Financial Shield
One of the most powerful tools for protecting family assets is a Medicaid Asset Protection Trust, or MAPT. This is an irrevocable trust specifically designed to shield your assets from long-term care costs while eventually allowing you to qualify for Medicaid if needed.
Here's how it works: You transfer assets—typically your home, savings, or investments—into the trust. After the five-year look-back period passes, those assets are no longer counted when determining your Medicaid eligibility. You can still live in your home if it's placed in the trust, and you can even receive income generated by trust assets, though that income will count toward Medicaid's income limits.
The tradeoff? Once assets go into an irrevocable trust, you give up direct control over them. You can't sell your house and pocket the proceeds, or withdraw the principal if you change your mind. This permanent nature is exactly what protects the assets—because you no longer own them, creditors and medical costs can't reach them.
I typically recommend MAPTs for clients who are healthy, in their 60s or early 70s, and want to ensure their family home and savings pass to their children rather than being consumed by nursing home costs. At Alatsas Law Firm, we've helped countless Brooklyn families establish these trusts, providing them with the peace of mind that comes from knowing their legacy is protected.
Converting Countable Assets into Exempt Ones
Not everything you own counts toward Medicaid's asset limit. Certain assets are "exempt," meaning Medicaid doesn't require you to spend them down before qualifying for benefits. Understanding this distinction opens up planning opportunities.
Exempt assets typically include:
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Your primary residence (with some conditions and equity limits)
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One vehicle
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Personal belongings and household items
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Prepaid funeral and burial arrangements
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A small amount of term life insurance
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Certain retirement accounts in some situations
Strategic asset conversion means using countable assets (like cash savings) to purchase or improve exempt assets. For example, you might use savings to make home improvements, pay off your mortgage, or prepay funeral expenses. This reduces your countable assets while improving your quality of life.
I had a client, John, who had $80,000 in savings but a deteriorating roof and outdated kitchen. By using that money for home improvements, he reduced his countable assets, increased his home's value for his heirs, and improved his living situation all at once. Six months later when he unexpectedly needed nursing care, those renovations didn't count against him for Medicaid purposes.
Spousal Protection Strategies: Safeguarding the Healthy Partner
If you're married and one spouse needs long-term care, special rules protect the healthy spouse (called the "community spouse") from complete impoverishment. Understanding these protections is crucial for married couples.
The community spouse can keep:
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The home, regardless of value in most cases
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One vehicle
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A portion of the couple's combined assets (the Community Spouse Resource Allowance, currently up to approximately $154,140 in 2025)
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A minimum monthly income allowance (around $3,853.50 in 2025)
Additional planning strategies can increase protection. Assets can be transferred from the spouse needing care to the healthy spouse without penalty. The healthy spouse can also purchase exempt assets or, in some cases, convert assets into income streams that provide additional support.
These rules are complex and vary by state, which is why personalized guidance is so valuable. I've seen situations where proper spousal planning saved families over $200,000 that would have otherwise gone to nursing home costs.
Long-Term Care Insurance: An Alternative Approach
While we've focused primarily on Medicaid planning and asset protection trusts, long-term care insurance deserves mention as an alternative or complementary strategy.
Long-term care insurance policies pay for nursing home care, assisted living, and sometimes home care services. If you have coverage, your assets remain protected because the insurance pays the bills. This is the most straightforward form of asset protection—your savings stay intact because someone else is footing the bill.
The challenge? Long-term care insurance is expensive, especially if you wait until your 60s or 70s to purchase it. Many people are also uninsurable due to health conditions. And unlike Medicaid, which guarantees coverage if you meet the criteria, insurance companies can and do deny claims based on policy terms.
For clients who can afford it and qualify health-wise, I often recommend purchasing long-term care insurance in their 50s as one layer of a comprehensive protection strategy, not as the only strategy.
Common Mistakes That Jeopardize Your Assets
In nearly 30 years of practicing elder law, I've seen the same costly mistakes repeated time and again. Avoid these and you'll be ahead of most families:
Waiting until there's a crisis. Once you're sick or already need care, many protective strategies are off the table or far less effective. The look-back period means you need to plan when you're healthy, not when you're desperate.
Simply giving everything to your kids. Direct gifts trigger the look-back period and can create tax problems. Plus, once assets are in your children's names, they're vulnerable to their creditors, divorces, and lawsuits. A properly structured trust provides far better protection.
Putting your house in your child's name. This seems simple but creates numerous problems: you lose the capital gains tax exemption, the home becomes vulnerable to your child's financial problems, and it still counts for Medicaid purposes if done within five years of needing care.
Failing to update your plan. Laws change, family circumstances change, and your plan needs to evolve. That estate plan you created 15 years ago may no longer accomplish your goals under current rules.
Going it alone. Elder law and Medicaid planning are incredibly complex. A mistake can cost your family tens or hundreds of thousands of dollars. Working with an experienced attorney who focuses on this area isn't an expense—it's an investment that typically pays for itself many times over.
Start Protecting Your Legacy Today
I opened this article with Maria's story. After our initial consultation, she understood that while we couldn't turn back time for her father, we could prevent the same crisis from affecting her and her siblings.
We established a Medicaid Asset Protection Trust for her and helped her educate her brothers about the importance of planning ahead. Five years from now, if Maria ever needs long-term care, her home and savings will be protected for her children. She won't have to experience the heartbreak she watched her father go through.
The question isn't whether medical costs could threaten your family's financial security—it's whether you'll take action before it's too late.
Asset protection isn't about gaming the system or being selfish. It's about being responsible. It's about ensuring that the home where you raised your children, the savings you accumulated through decades of hard work, and the legacy you want to leave behind are protected for the people you love.
Every family's situation is unique, with different assets, health conditions, family dynamics, and goals. The strategies I've outlined here are powerful, but they need to be tailored to your specific circumstances. What works beautifully for one family might be completely wrong for another.
If you're worried about protecting your assets from medical costs, I encourage you to take the first step: schedule a consultation with an experienced elder law attorney. Come prepared with questions, bring information about your assets and family situation, and be ready to have an honest conversation about your concerns and goals.
At Alatsas Law Firm, we've spent decades helping Brooklyn families just like yours navigate these complex decisions. We understand the unique challenges facing middle-income families in our community, and we're committed to providing personalized, practical solutions that actually work.
Don't wait for a crisis to force your hand. The time to protect your family's assets is now, while you still have options and time on your side. Your future self—and your family—will thank you for taking action today.
