Many people put off long-term care planning because they assume it won’t be necessary. Others believe that if the need arises, existing healthcare benefits will cover the costs.
These assumptions often lead to financial hardship when reality proves otherwise. Without proper preparation, you may find yourself or your loved ones facing difficult choices with limited options.
What Are the Odds?
One of the most common misconceptions is that long-term care is only required in extreme cases. People who are active and in good health often assume they will never need assistance with daily activities.
However, the U.S. Department of Health and Human Services reports that slightly more than half of seniors will require paid long-term care at some point. This includes in-home care, assisted living, or a nursing home stay.
A sudden illness, injury, or cognitive decline can make long-term care a necessity, even for those who have lived independently for decades. Conditions such as Alzheimer’s disease, arthritis, or complications from a stroke often develop gradually.
Many people only recognize the need for care when it becomes overwhelming for family members to manage alone.
Failing to plan ahead leaves you vulnerable to rushed decisions and unexpected expenses. The cost of long-term care can quickly drain savings, leaving little for a spouse’s financial security or a planned legacy for heirs.
The Truth About Medicare Coverage
Another common misunderstanding is the belief that Medicare will cover long-term care. Medicare provides limited coverage for skilled nursing or rehabilitative services after a hospital stay, but it does not pay for custodial care.
This means that once rehabilitative services end, you are responsible for the full cost of ongoing care.
Many families only discover this gap in coverage when faced with an urgent need for care. Without an alternative plan, they must rely on personal savings or family members to cover expenses.
This can create a significant financial burden, especially when care is needed for several years.
Private health insurance also does not cover long-term custodial care. While long-term care insurance is an option, policies are often expensive, and pre-existing health conditions may make it difficult to qualify.
Relying on traditional insurance plans or assuming that government benefits will provide comprehensive coverage can lead to financial hardship when care becomes necessary.
Medicaid Covers Long-Term Care
Unlike Medicare, Medicaid does pay for long-term custodial care in a nursing home and, in some cases, in-home care. However, Medicaid eligibility is based on strict income and asset limits.
In New Jersey where we practice and in most other states, the asset limit is $2,000. Other non-countable assets include your home, one motor vehicle, household items, personal effects, term life insurance, and $1,500 set aside for final expenses.
If you apply for benefits without proper planning, you may be required to spend down your savings and assets before qualifying. This process can leave a healthy spouse in a difficult financial position and deplete the inheritance you intended to leave for loved ones.
Fortunately, legal planning can help protect assets while ensuring Medicaid eligibility when the need for care arises.
A Medicaid trust allows you to remove assets from your name so they are not counted when determining eligibility. This trust is an essential tool for those who want to secure care while preserving financial stability.
Using a Medicaid Trust to Protect Assets
A Medicaid trust is an irrevocable trust designed to protect assets from being considered when applying for Medicaid. Once assets are transferred into the trust, they are no longer in your personal name, meaning they will not count toward Medicaid’s asset limits.
However, Medicaid has a five-year look-back period, which means any assets transferred within five years of applying for benefits will still be counted.
By creating a Medicaid trust in advance, you will be poised to qualify for Medicaid if you need long-term care in the future. Plus, you can continue to receive income that is generated by assets that are held by the trust. This is key, because most seniors rely on their savings to provide income that helps them make ends meet.
Planning Ahead Is a Must
If long-term care is needed and no plan is in place, families often face difficult choices. Selling a home, liquidating retirement accounts, or relying on family members for support can create financial instability.
A Medicaid trust eliminates these concerns by providing a structured solution that allows you to secure care while preserving what you have worked to build.
Estate planning and long-term care planning should go hand in hand. A well-prepared plan ensures that assets are managed properly, healthcare preferences are honored, and family members are not left struggling to make last-minute financial decisions.
Long-term care planning is not just about anticipating potential medical needs. It is about securing your future, maintaining control over your assets, and protecting your loved ones from financial hardship.
By taking action now, you ensure that when the time comes, the care you need is available without placing an undue burden on your family.
Let’s Get Started!
In light of the five-year look back period, you can go forward with peace of mind when you plan ahead while you’re still perfectly capable of handling your own needs.
When you work with our firm, we will answer all of your questions about this approach. Your preparations for potential long-term care costs will be part of a broader plan shaped to suit your specific needs.
You can set the wheels in motion by calling our Warren, NJ elder law and estate planning office at 908-222-8803. If you would like to send us a message, fill out our contact form and we will get back in touch with you as soon as possible.
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