Submitted by Tim Whisler, CRPC®, CLTC®, Certified Financial Fiduciary® President of The Whisler Agency, Peoria IL.
Most people believe they will “figure out long-term care if it happens.” The problem is that by the time it happens, many of the best options are already gone.
We all know that nursing home care is expensive. According to the American Council on Aging, the 2026 estimated daily cost for a private room in the Peoria area is $347. When families can no longer pay privately, they often turn to Medicaid. That is where the five-year clock quietly appears.
Medicaid uses a five-year lookback period. This means any gifts or asset transfers made within five years of applying for benefits can result in penalties. Families who try to protect assets at the last minute often discover they unintentionally created a larger problem.
This is why early planning matters.
There are legal strategies families use successfully when planning is done in advance. One of the most common tools is an irrevocable asset protection trust. When structured correctly and funded early enough, this can protect assets such as a home or investment accounts while still allowing families to control how assets ultimately pass to heirs.
Spousal protections are another area many people do not understand. If one spouse needs care, the healthy spouse is not required to spend down everything. Federal rules allow the community spouse to retain assets and income to avoid financial devastation. Proper planning can significantly improve the outcome for both spouses.
Some assets are already considered exempt when structured correctly. A primary residence, one vehicle, personal belongings, and prepaid burial arrangements may already receive favorable treatment. The key is making sure everything is coordinated intentionally rather than accidentally.
There is also a difference between spending and gifting. Medicaid allows individuals to spend their assets. It does not allow them to give them away freely within the lookback window. Strategic spend-down may include home modifications, medical expenses, paying off debt, or preplanning funeral costs. These steps preserve value while staying within the rules.
An alternative to Medicaid is long-term care insurance, if it is suitable for your portfolio. This policy can protect assets and your independence by providing more flexibility in how and where care is received. But not all long-term care insurance is worth the premium. When it is an appropriate fit for the portfolio, we recommend the “Asset-Based Long-Term Care” policy. In simple terms, this provides access to a bucket of funds that can be used for qualifying long-term care expenses. If the policy owner passes away before the funds have been exhausted, the remaining funds are passed to the named beneficiaries. It’s not a one-size-fits-all solution, but it is worth exploring.
What often causes the most damage are well-meaning but uninformed actions. Adding children to deeds or bank accounts. Transferring a home without understanding the consequences. Relying on verbal family promises. These choices can create tax problems, legal issues, and Medicaid penalties.
The takeaway is simple. There are solutions. They are legal. They work. But they require foresight.
Asset protection planning is a key element of your retirement income plan. It is about protecting dignity. It is about protecting a spouse who may still be living independently. It is about protecting adult children from being forced into impossible decisions during emotional moments.
The best time to start the conversation is before you think you need it. Let’s take a few minutes to review your portfolio to help determine how to pay for these costs if you or your spouse needs care.
To learn more about Tim and The Whisler Agency, go to www.thewhisleragency.com. You can watch episodes of his weekly TV show at www.thewhisleragency.com/tv-series. His podcast “License to Spend” is accessible in the Media tab section of his website. You can reach Tim by calling (309) 291-0491 or by email at [email protected].
Investment advisory services are offered through Foundations Investment Advisors, LLC, an SEC Registered Investment Advisor. The views, statements, and opinions expressed are those of the author, and not necessarily of Foundations or their affiliates. The content provided is for educational purposes only and the views reflected are subject to change at any time without notice. No investment, legal, or tax advice is provided. Always consult with a professional. Foundations deems reliable any statistical data or information obtained from third-party sources that is included in this article, but in no way guarantees its accuracy or completeness.
