Long-Term Care Planning


Paying Your Own Long-Term Care Expenses
Private Long-Term Care Insurance
Planning for Long-Term Care
What the Future Holds


Do you know someone who has spent time in a nursing home? Have you ever thought about going into a nursing home yourself?  Most people answer the first question “yes” and the second question “no.” It is one of those situations where we feel it could never happen to us. Studies show that approximately three out of every five people reaching age 65 will need some type of long-term care. Are you one of the many people who would prefer to stay at home no matter what the cost? Without proper planning, the lack of available services and the staggering price tag may leave you with few alternatives.

In New Hampshire and Vermont, the annual cost of nursing home care ranges from approximately $100,000 to over $150,000, and it is climbing each year. That is approximately $275 to $410 per day. If you choose to stay at home, where most of us would prefer to be, and hire home health aides, the cost of your care could be even higher. Home health care costs vary widely, but agencies charge anywhere from $25to $40 per hour for home health aides. In some cases, people pay over $200,000 per year for 24-hour home care. What many people fail to realize is that their health insurance and/or Medicare will not cover the cost of long-term care, whether at home, in an assisted living facility or a nursing facility. Paying for long-term care is a personal responsibility that has become a primary concern for all age groups across the nation.

The causes of our long-term care crisis are many: increasing costs, a growing population of seniors (Baby Boomers started turning 65 in 2010), poor government management, medical technology resulting in greater longevity and the inability or unwillingness of families to care for their elderly at home. The result of the crisis is that we must all rethink the way we plan for the future and take into consideration the very real possibility that long-term care may become part of our lives. Recent federal legislation changed Medicaid eligibility rules, making it more difficult to qualify. States including New Hampshire and Vermont are considering more cuts to control spending on Medicaid.

This report is designed to provide an understanding of the components involved in long-term care planning including Medicare, private insurance, Medicaid, and estate planning, and to explain how recent changes in the law and future trends will affect tomorrow’s long-term care consumer.


Hospital and Post-Hospital Skilled Care

Contrary to common belief, older Americans cannot rely on Medicare for payment of long-term care costs. Although Medicare is available to most individuals age 65 or older, coverage is limited to qualified medical expenses such as:

  • 80% of approved amounts for doctors, surgical services, etc;
  • hospitalization for 90 days per benefit period with a deductible of $1,484 (total) for the first 60 days and a co-payment of $371 per day for the remaining 30 days;
  • an additional one-time lifetime benefit of 60 days, with a co-payment of $566 per day (for a maximum of 150 days); and
  • post-hospital skilled nursing home care with payment in full for 20 days and a co-payment of $185.50 per day for 80 days (maximum of 100 days).

Gaps in Medicare Coverage

Medicare pays only for nursing home care following a hospital stay of at least three days, and only if the care provided is considered skilled care. Skilled care is provided under the supervision of a doctor, requiring skilled professionals such as physical therapists or registered nurses, as opposed to custodial care, which provides basic personal care and other maintenance-level services. Home health care may be available in limited amounts, but only if medically necessary, which is a very rigorous standard. For all Medicare benefits, there are deductibles and co-payments, which can be substantial, and Medicare is in the process of becoming a means tested program.[1] There are excellent insurance policies available to fill these gaps in Medicare coverage, appropriately called Medigap insurance, which must be purchased privately.

Medicare does not cover hospital costs beyond 150 days, skilled nursing home costs beyond 100 days and, most importantly, Medicare does not cover any custodial nursing home care or non-skilled home health care. It is difficult for a Medicare recipient to qualify even for the limited skilled care benefits, and all others are considered custodial patients. With the Medicare Trust Fund currently projected to fail in approximately 2026, gaps in coverage are widening rapidly.

Medicare Part D – Prescription Drug Coverage

In 2006, a Part D program was added to Medicare to cover the costs of prescription drugs. If prescription drug coverage through an employer as part of retiree benefits is offered, there is a choice to accept this coverage or to enroll in Medicare Part D. All other individuals must select a Medicare Part D Plan.

The initial enrollment period begins three months before and ends three months after the month of the 65th birthday, or the month one begins receiving Medicare based on disability. Individuals may change their plans only once a year, from November 15th through December 31st. There are many different plans to choose from, and the choice is often confusing.

The monthly premium for the Medicare Part D plan varies widely, depending on a array of factors, including geographic location; insurance provider; and your income level.  If someone is a low income Medicare recipient, the government offers extra help in meeting the premium, deductible and co-payment costs. Conversely, if you are a high income Medicare recipient you are required to pay a higher monthly premium for Part D coverage.

In addition, most Medicare drug plans have a coverage gap (the so-called “donut hole.”)  This means that after you and your plan provider have spent a certain amount of money on covered drugs you are required to pay all costs out-of-pocket for your prescriptions until you reach the yearly limit.  (In 2023, the yearly limit is $3,300.00.)[2]

There are a number of factors that should be taken into account in deciding whether to enroll in a Medicare Part D plan and which plan to choose. Contact the Caldwell office if a referral is needed for a professional who has Medicare skills.



Self-insuring, or paying one’s own way, may be an option. However, one can expect to pay approximately $100,000 to $150,000 per year for nursing home care, or more for better facilities. Home care can be even more expensive, with 24/7 care costing in excess of $200,000 per year. If a person has sufficient fixed income, and income-generating assets, which together produce total income of $200,000 or more, this may be the way to go. Even then, what about the future well-being of the spouse, children and families of those who need long-term care?

Financial and Estate Tax Planning for Long-Term Care

Planning to self-insure for long-term care expenses requires a collaboration of financial planning and estate and tax planning to ensure that sufficient income can be generated to prevent the depletion of assets. Use of a thorough fact-finding questionnaire is highly recommended, to assemble all the necessary information regarding assets, income, expenses and other factors, such as where care will be provided and what support can be expected from family caregivers. This information provides a foundation for the planning required to maximize the value of Social Security income, fixed pensions, dividend and interest income and other income streams, along with maximizing deductions for things such as medical expenses and other deductible items. Investment strategies to produce growth and income sufficient to fund projected expenses are a key ingredient for successful retirement, and a qualified financial planner or investment advisor should be consulted. Once investment strategies are in place, and projections for income and expenses are completed, the plan to self-insure can be implemented.

Wealth Replacement Using Life Insurance

Creative tax and financial planning can further maximize the value of existing assets and income and provide tax savings if long-term care becomes necessary. One example is the targeting of retirement funds such as IRAs, 401Ks, and other retirement vehicles to pay long-term care expenses. Qualified long-term care expenses are fully income tax deductible as a medical expense, subject to a floor of 7.5% of adjusted gross income. For example, if an individual has $50,000 of adjusted gross income, medical expenses above $3,750 are fully deductible. If the need for long-term care arises, accessing assets such as retirement funds, tax deferred annuities and U.S. savings bonds may provide an excellent opportunity to utilize the medical expense deduction to offset income tax consequences created by liquidation of those assets. If one has an IRA, a 401K, a tax deferred annuity or other assets that are not intended for retirement income, those assets may be used to pay long-term care expenses if it becomes necessary, and life insurance in an amount sufficient to replace the asset in the event it is depleted by long-term care costs may be purchased. In this way, a securely invested otherwise taxable asset can be used to pay long-term care expenses, while the life insurance policy is used to replace the value for the family, free of estate taxes, if certain conditions are met. If long-term care is not needed, the family would receive both the targeted asset and the life insurance proceeds, enhancing the legacy left to the beneficiaries.


Most Americans will not be able to self-insure for long-term care. Therefore, if one is insurable and long-term care insurance premiums are affordable, such a policy should be integrated into the estate plan to provide protection without the need for transferring assets.

Long-term care (LTC) insurance has been marketed since before 1974, but in 1997 it gained widespread attention through federal legislation. New policies are very flexible and provide coverage (including cash benefits) for all levels of care; they should be considered as part of a sound financial plan. Benefits to look for in an LTC insurance policy include:

  • nursing home and home care coverage;
  • sufficient daily payouts ($200/day is a good start);
  • elimination periods (the number of days one must be in the nursing home before benefits begin, typically 0 to 100 days; duration of benefits (three years, five years, a lifetime);
  • renewability (make sure it is guaranteed renewable);
  • waiver of premiums (allows one to stop paying premiums during the time he is receiving benefits);
  • inflation protection, etc.

As with life insurance, the older an applicant is the harder it is to obtain a policy and the more expensive LTC coverage becomes. More importantly, the applicant must be insurable.
New Hampshire and Vermont are in the process of joining several other states in adopting a program that integrates LTC insurance with Medicaid. The program is being fine-tuned and should be implemented in the next year or so.

Counseling clients on the use of LTC insurance has become a sub-specialty of Elder Law and an integral part of comprehensive estate planning. Choosing a solid company, the correct policy, and daily benefit amounts calls for independent advice from a qualified professional or attorney, a service that we are pleased to provide. Contact us for a brochure entitled, Questions and Answers on Long Term Care Insurance.


Unlike Medicare, Medicaid is a government program that pays medical costs and long-term care costs. Medicaid is, however, designed as a payor of last resort. To qualify, one must meet strict financial and other eligibility requirements. The rules governing Medicaid are complex, and frequently change, requiring great care in the planning and application for benefits.

Income and Resource Limits

An individual in a nursing home applying for Medicaid can have only $2,000 (VT) or $2,500 (NH) in total assets, plus an irrevocable burial fund of any reasonable amount and certain exempt assets such as a car, clothing, etc. Income must be contributed toward the cost of care, and an individual in a nursing home is entitled to keep only approximately $74 per month allowance. If the individual owns a home that is occupied by his or her child who is under the age of 21, or certified blind or disabled, the home is not included in the total asset calculation and is not subject to a Medicaid lien. If the individual owns a home that is not occupied by one of these people, and the individual’s equity interest in the home is greater than $688,000, the amount of excess equity is counted toward the total amount of assets that can be kept by the individual.  (Note: a single person in a nursing home in NH would be required to sell the home.  In VT the same person could keep the house, so long as his equity in it was less than $688,000.)

If the Medicaid applicant is married and enters a nursing home while the other spouse remains in the community, the “community spouse” may keep certain family assets.  A community spouse living in New Hampshire may keep $29,724 or one-half of a couple’s resources up to a maximum of $148,620 in assets, in addition to the home and any other exempt assets the couple owns. A community spouse in Vermont may keep up to $148,620 in assets in addition to the home and other exempt assets. The spouse in the nursing home is entitled to keep only approximately $74 per month as a personal needs allowance. The community spouse living in New Hampshire is allowed a minimum income of $2,289 per month, with adjustments for certain items. Similarly, a community spouse living in Vermont is allowed a minimum income of $2,465 per month.  Without proper planning, all assets and income above these levels must be spent on care or on exempt items before Medicaid will pay the nursing home spouse’s costs.

Home Care Rules

Individuals seeking to obtain long-term care services outside of a nursing home must navigate a different set of Medicaid eligibility rules, depending on the type of services required. One of the primary goals expressed by our clients is to remain in their own homes, or at least in the most independent setting possible. Navigating the maze of community care requires an in-depth knowledge of the services available in the home and in adult homes and assisted living facilities, and an ability to manage income and resources to maximize their value, while utilizing Medicaid services wherever available to supplement the care provided by the individual and his family.

Transfer of Asset Rules

What if an individual gives assets away in order to qualify? As might be expected, there are rules governing such transfers. When one gives money or property away, that individual and his spouse may be ineligible for Medicaid for a certain number of months, known as the penalty period. Exceptions are made for transfers to a spouse or a disabled child and for certain transfers of the home to siblings or caretaker children. Some typical questions include the following: 

How far back does Medicaid look to find asset transfers, or what is the “look-back period”? For both New Hampshire and Vermont, the look-back period for asset transfers is five years or 60 months. When applying for Medicaid in either state, the caseworkers in the local Medicaid office will ask for financial records, bank statements, tax returns, etc., for the past five years, and will question transactions within that timeframe. Therefore, a thorough analysis of all transactions within the look-back period must be undertaken prior to filing for Medicaid.

How is the penalty period calculated? The penalty period for nonexempt transfers is calculated by dividing the total value of all property transferred by the average monthly cost of nursing home care in that state. In 2023, the statewide average monthly cost of nursing home care in New Hampshire is $10,756.51. In Vermont that figure is $10,442.43. For example, if a New Hampshire resident transferred $50,000 and applied for Medicaid in 2023, the penalty period for that transfer would be 4.6months ($50,000 divided by the average monthly cost of $10,756.51 and rounded up to the nearest tenth of a month).

When does the penalty period begin to run? The penalty period begins to run when the applicant meets three conditions:  he needs nursing home care; he has $2,500 (NH) or $2,000 (VT) or less in assets; and he applies for Medicaid. For example, an individual from Vermont makes a nonexempt transfer of $52,000 in April 2023. On July 1, 2023, the individual is living in a nursing home, has $2,000 in assets, and files a Medicaid application. At that time, a 5 month penalty period is imposed ($52,000 divided by the statewide average monthly cost of $10,756.51 = 5 months, rounded up to the nearest tenth of a month). The individual now has to wait 5 months before he is eligible for Medicaid, even though he no longer has the assets to pay for the nursing home expenses. Without proper planning, anyone could fall into this situation.

Caldwell Law provides advice on Medicaid eligibility, prepares and files the Medicaid application, and advocates and litigates for Medicaid denials, spousal claims and estate recoveries.

Other Medicaid Rules

How does Medicaid treat jointly held assets? If assets are held in an account by a Medicaid applicant and another individual as joint owners, and funds are withdrawn by either individual, it will count as a transfer against the Medicaid applicant. For example, withdrawal of funds from a joint bank account by the child of a Medicaid applicant will be treated as though the Medicaid applicant parent had transferred the funds to the child. In addition, funds held in a joint account in a bank or similar financial institution will be presumed by the state to be owned entirely by the applicant. If both signatures are required to withdraw funds (i.e., Some brokerage accounts require all named owners to sign.), only half of the value will be counted as belonging to the applicant. Each asset must be evaluated to determine ownership and ownership rights prior to filing a Medicaidapplication.

How does Medicaid treat Trusts? If assets are held in a revocable trust, they are considered available for Medicaid purposes. An individual who establishes an irrevocable income-only trust (otherwise known as a Medicaid Trust) will protect the assets held by the trust after the expiration of the applicable penalty period imposed as a result of the transfer of property into the trust, if the transfer of assets occurred within the five-year look-back period. Income generated by assets held in an irrevocable trust will be considered available to pay for the cost of long-term care. However, New Hampshire has very strict rules about what assets can be placed into an irrevocable trust and still be protected (i.e., an applicant’s or his spouse’s house cannot be placed in an irrevocable trust and maintain its status as an exempt asset). Decisions regarding the use of a trust as part of a Medicaid plan require careful review of an individual’s circumstances.

Can Medicaid recover from a beneficiary’s estate? States are required to seek recovery of benefits paid to a Medicaid recipient from his estate. It has been left to each state to determine what assets will be included in the Medicaid estate, which could conceivably include assets held in trust and other partial transfers, such as deeds with retained life estates. For instance, New Hampshire law permits the Commissioner of Health and Human Services to recover against all property, both real and personal, in a revocable trust and all other property owned by the Medicaid recipient, whether outright or in a joint tenancy with rights of survivorship, in a tenancy in common, or in a life estate.[3] Vermont law, on the other hand, generally limits recovery to a recipient’s probate estate, with a few exceptions.

Can Medicaid recover from a community spouse’s estate? If assets are held by a community spouse, (the spouse has stayed in the community) the state may have rights to recover for Medicaid paid on behalf of the applicant spouse. These rules are evolving and must be analyzed in each case.

Are there any exceptions to the Medicaid eligibility rules, or what does Medicaid consider an undue hardship? Both New Hampshire and Vermont have established procedures to determine whether the denial of Medicaid eligibility would work an undue hardship on an applicant. As a practical matter, these hardship exceptions are difficult to prove and are not often granted. If an individual innocently makes transfers that disqualify him from receiving Medicaid, the state may waive the eligibility requirements if:

  • The applicant meets the other eligibility requirements;
  • The applicant or his spouse is unable to get the transferred assets back, despite his or her best efforts; and
  • The applicant cannot get appropriate medical care and his health or life would be endangered if Medicaid did not pay for nursing home care, or the penalty period would deprive the applicant of food, clothes, shelter or other necessities of life.


What can be done to plan for long-term care, ensure that a health crisis or chronic illness will not erode an individual’s security and dignity, and provide for family and loved ones? The answer is not simple. A careful analysis of each individual’s personal and financial situation must be done to formulate the proper plan. Factors such as income from social security, pensions and investments; the nature and value of assets; age and health; family situation; and other considerations must be evaluated in order to make the right choices. A comprehensive questionnaire that we have prepared to assist in gathering the information needed is available upon request.

If long-term care insurance is not an option, and personal income and resources are not sufficient, one planning technique is to transfer assets to a Medicaid Trust, retaining the income for the Trustmaker (sometimes referred to as Trustmaker, Settlor or Donor) and preserving the principal of the assets (the assets held by the Trustee) for the spouse, children or other beneficiaries. When properly drafted, the trust will provide asset protection, with significant tax benefits as well, including avoidance of gift taxes and elimination of capital gains taxes.

In addition, trust assets will avoid probate. The trust allows the Trustee to access the principal of the trust during the Trustmaker’s lifetime for the benefit of the Trustmaker’s children or other beneficiaries, although the Trustee cannot give the principal directly to the Trustmaker. Most Trustmakers also choose to maintain the right (called a Special Power of Appointment) to change the ultimate beneficiaries of the trust, by reappointing the assets to different family members at a later date. This power retains control for the Trustmaker and prevents transfers to the trust from being treated as taxable gifts.

A properly drafted income-only trust that gives a Trustee no discretion to distribute principal to the Trustmaker-Beneficiary, or to his spouse, is still a viable long-term care planning tool. Therefore, a senior preparing an estate plan may keep the income from an irrevocable income-only trust for himself/herself, with the remainder distributable to specific beneficiaries, and qualify for Medicaidonce the applicable penalty period has expired, without the assets in the trust being considered by the state as available to pay for the cost of long-term care.

If use of a trust is not desired, it is still possible to make outright gifts of property, wait until the expiration of the 60-month look-back period, and to then apply for Medicaid, or use other planning techniques.

If a home is the only asset to protect, a deed to children or others, with a retained life estate for the Trustmaker will protect the property and the right to Medicaid, once the applicable penalty period has expired. However, because the penalty period begins only after the applicant is otherwise eligible for Medicaid and files a Medicaid application, the applicant must have outside funding available for his care needs until the penalty period expires. Consideration must also be given to the fact that if the property is sold and the Trustmaker is in the nursing home, a portion of the sale proceeds equivalent to the value of the life estate (using Medicaid tables that give a higher value than an IRS life expectancy table) will have to be turned over to the nursing home.

Even if nursing home care is imminent, planning opportunities exist to protect a substantial portion of the applicant’s assets.  Proper use of the Medicaid transfer rules allows individuals to provide security for themselves and a legacy to their families, while ensuring that they will receive long-term care. By gifting the appropriate amount of assets, and structuring other asset transfers as an exchange for a secured interest, (much like a loan—through the use of a promissory note, private or commercial annuity or Grantor Retained Annuity Trust (GRAT) to pay for expenses during the period of ineligibility that is created by the gifts) individuals can channel assets to a trust, or to children and grandchildren, while receiving sufficient income through the note or annuity payments to pay for their care until Medicaid is available.

Moving in with a relative or family member may also be an option. There may be programs available through Medicaid to help pay for personal care aides and home health aides. It may also be advisable for a senior to put in place a caregiver agreement and/or personal service contract to make a transfer to a family member as compensation for his agreement to provide homecare services.

A Geriatric Care Manager (GCM) or trained professionals at a medical facility (such as those found at the Center for Healthy Aging at Dartmouth Hitchcock Medical Center) or both, working together with the attorney and family, can assess the long-term care needs of an older adult. This includes consideration of all financial and other resources available to sustain an older person at the highest possible level of independence.


The crisis in healthcare and long-term care will shape public policy for years to come. It has become clear that long-term care, such as nursing home and home healthcare, will not be a part of any new universal health insurance program. The Deficit Reduction Act of 2005 is just the beginning. There will be continuing pressure to limit expenditures on existing programs, including Medicare and Medicaid. Within the past year, reform of Medicare, Social Security and Medicaid has risen to the top of the government’s agenda, in Washington DC, New Hampshire and Vermont.

It is imperative that seniors, those approaching retirement age, and the families of those needing long-term care, take advantage of the planning opportunities that exist today.

Everyone’s situation is unique. It is impossible to discuss all of the planning opportunities in this report. As with any planning, a good way to begin is to seek competent advice from a qualified professional. We at Caldwell Law are dedicated to helping people find solutions to their long-term care needs.

[1] Means testing is an examination into the financial state of a person to determine eligibility for public assistance.

[2] People who receive extra help paying for their Part D premiums do not have to worry about paying all costs out-of-pocket when they reach the coverage gap.
[3] Note: Estate recovery against property owned by a Medicaid recipient as a joint tenant, tenant-in-common or life tenant is limited to interests in property created on or after July 1, 2005.

Get the facts. Find out what you need to know. Contact Caldwell Law for a free consultation or browse our website to learn more. We offer many free workshops, free resources, and monthly newsletters.