What Really Happens to Your Assets If You Enter a Nursing Home?
Will a lifetime of saving vanish the moment you need long-term care? Many Tennessee families lose sleep over that thought as the odds of spending time in a nursing home climb with age.
At Foust & Foust, PLLC, we focus on estate planning, probate, and trust administration for people who want answers before a crisis hits.
This article breaks down what truly happens to income, savings, and property when a resident is admitted to a nursing home in Tennessee and shows legal ways to keep those assets working for loved ones.
Understanding How Assets are Affected
Once a person signs an admission agreement, monthly invoices start landing. Most residents pay in this order: regular income such as Social Security, then checking or savings, and lastly by selling items like cars or brokerage accounts if bills still exceed funds.
Your home is handled differently. While you are alive and living in the facility, neither the nursing home nor the government may force a sale. After death, though, the Medicaid Estate Recovery Program (MERP) can file a claim against probate property to recoup TennCare payments. A nursing home can also submit a creditor claim if any balance remains.
The goal is to plan early so the estate either owes nothing or only owes what cannot reasonably be protected.
Medicaid (TennCare) Eligibility and Asset Limits
Because few families can write checks for $7,000 or $8,000 every month forever, many turn to TennCare. TennCare is a joint state-federal benefit that pays approved facilities when an applicant’s income and countable resources fall below strict numbers. For 2025, the limit hovers near $2,000 in countable assets for a single applicant, with income rules that direct almost all monthly checks toward care.
The natural follow-up is, “Can we keep part of the estate for children and still use TennCare?” The answer is yes, yet it requires thoughtful moves well in advance, as we explain next.
Asset Protection Strategies: Preserving Your Legacy
Protecting wealth is not a do-it-yourself weekend project. The following strategies are well known, but each has quirks that call for personalized legal guidance.
Long-Term Care Insurance
A traditional policy can cover hundreds of dollars per day, easing or eliminating the need to draw from investments. Premiums grow with age, benefits vary widely, and underwriting can be tough if health issues already exist. Hybrid life/long-term care contracts soften the “use it or lose it” problem by paying a death benefit if care funds are never claimed.
Gifting Assets
Giving property to children or grandkids more than five years before a TennCare application reduces the applicant’s estate. Gifts made inside the five-year look-back cause a penalty period, meaning TennCare will not help for a set number of months that mirrors the value transferred. TennCare never forces the recipient to return the gift, so the family must find private dollars during any penalty window.
Asset Protection Trusts
Placing a house or brokerage account into an irrevocable trust moves ownership from the individual to the trust, so those assets no longer count toward the TennCare resource test after five years. A trustee, not the former owner, manages the property, and the timeline again underscores why early planning pays off.
Medicaid Compliant Annuities
These products turn a large, countable asset into an income stream that TennCare treats differently under federal rules. Dollars used to purchase the annuity must be paid out during the owner’s life, and strict drafting rules apply.
Promissory Notes and Agreements
In the right setting, an elder can loan cash to a trusted child in exchange for a written repayment schedule. The note converts a spending asset into an income source, possibly trimming countable resources.
The tools can feel technical, so the table below offers a bird’s-eye view.
| Strategy | Main Benefit | Primary Drawback | Best Time to Start |
| Long-term care policy | Pays the daily cost of care | High premiums at older ages | 50s or early 60s |
| Gifts to loved ones | Lowers estate value | Five-year TennCare penalty window | At least five years prior to need |
| Irrevocable trust | Shields’ home and investments | Loss of direct control | Five or more years before care |
| Compliant annuity | Turns assets into an income stream | Complex contract rules | When applying for TennCare |
| Promissory note | Keeps funds in the family circle | Payments count as income | Just before or during application |
Seeing the differences laid out makes it easier to match tools to family goals, yet professional help is still vital to avoid expensive missteps.
Income Allocation During Nursing Home Stay
After TennCare approval, almost every dollar of monthly income is routed to the facility first. TennCare then pays the remaining bill.
The resident is allowed to keep a Personal Needs Allowance, currently about $60 per month, for small comforts such as haircuts or greeting cards. A few exceptions can divert income away from the nursing home.
Spousal Allowance
If the “community” spouse at home earns little, part of the nursing home resident’s income can shift to that spouse so household bills are met. The exact numbers change each year, yet in 2025, the target minimum monthly maintenance needs level is around $2,465.
Dependent Needs
When a minor child or a disabled adult child relies on the applicant, TennCare may approve an extra deduction to cover living expenses for that dependent.
Unpaid Medical Bills
Old medical debts that predate the TennCare application can sometimes be paid from current income instead of sending everything to the nursing home.
Temporary Stays and Home Maintenance
If a physician certifies that rehab is expected to last fewer than six months, income can be used to keep mortgage payments, taxes, and utilities current on the primary home.
- Request any income diversion in writing.
- Supply proof such as bank statements, child dependency awards, or medical invoices.
- Expect TennCare to review requests annually.
Understanding these rules ahead of time spares the family last-minute scrambles and makes cash flow much easier to track.
Take Control of Your Future: Contact Foust & Foust, PLLC, for Guidance
No single article can answer every “what if,” yet having a roadmap turns worry into workable steps. Early planning helps you keep the promises you made to your family, while late planning often limits choices. Our team at Foust & Foust, PLLC, walks Tennessee families through trust creation, gift timing, TennCare applications, and probate questions every day.
Feel free to call us at 865-203-4041 with your questions, or reach out through our Contact Us page to set up a conversation. We reply promptly because we know care decisions rarely wait. Let’s place a clear, legally sound plan around the assets you worked so hard to build.
