Does an LLC Protect Assets From a Nursing Home?

No, an LLC does not protect your assets from a nursing home or from Medicaid. When you apply for long-term care Medicaid, the agency treats your ownership interest in the LLC as a countable asset and values it at whatever the company holds. Worse, moving assets into an LLC shortly before you apply is treated as an improper transfer and can lock you out of Medicaid coverage for months while you have no other way to pay for care.

The confusion is understandable. In business, an LLC builds a wall between the company’s liabilities and your personal savings. People assume that wall works both ways. It doesn’t. Medicaid’s rules were written specifically to see through arrangements like this.

Why the LLC Wall Doesn’t Work in Reverse

An LLC protects your personal assets from claims against the business. It does not hide personal assets from a program evaluating what you own.

Medicaid looks through the corporate structure entirely. Your membership interest in the company is itself a countable asset, valued at whatever the underlying holdings are worth. Transfer a $200,000 brokerage account into a single-member LLC, and Medicaid sees a $200,000 asset. The wrapper changes nothing. What matters to the agency is whether you have the legal authority to access, sell, or liquidate what’s inside. As a sole member or majority owner, you do, so the assets are treated as available to you.

Structuring the LLC with multiple members or a restrictive operating agreement doesn’t reliably fix the problem. Caseworkers are trained to evaluate whether the applicant retains meaningful control. If you created the LLC, funded it with your own money, and could dissolve it or pull assets back out, the agency will count it.

What Medicaid Actually Counts

Medicaid is the primary payer for long-term nursing home care in the United States, and it only covers people who meet strict financial thresholds. Countable assets include bank accounts, investments, real estate beyond your primary home, and most other property you could convert to cash. In the majority of states, a single applicant can keep no more than $2,000 in countable assets. A handful of states set higher limits, and at least one has eliminated the asset cap entirely for long-term care applicants.

Some assets are exempt. Your primary residence is typically excluded as long as your equity in it falls below a threshold your state sets within a federal range of $752,000 to $1,130,000 in 2026.¹ One vehicle, personal belongings, and small amounts of life insurance are also generally excluded. Because the countable limits are so low, most people spend down their savings on care before they qualify. An LLC interest is not on the exempt list.

The Five-Year Look-Back and Why Late Moves Backfire

Federal law requires every state to scrutinize an applicant’s financial transactions during the 60 months before they apply for long-term care Medicaid.² The clock starts on the date you both enter a nursing facility and apply for benefits. During the review, the agency examines bank statements, property records, and financial accounts for both spouses going back the full five years, looking for any transfer made for less than fair market value.

Deeding a rental property into a new LLC you control, gifting LLC membership interests to your children, moving funds into an LLC and then distributing them to family members: all of these get flagged as improper transfers.

When the agency identifies an improper transfer, the consequence is a period of ineligibility, not a fine. The agency divides the total value of the transferred assets by a figure representing the average monthly cost of private nursing home care in your state. That divisor varies widely, generally ranging from roughly $8,000 to more than $15,000 per month. The result is the number of months you cannot receive Medicaid-funded nursing home care.

The math is punishing. Transfer $150,000 with a state divisor of $10,000 and you face a 15-month penalty. The penalty period doesn’t start when you made the transfer. It starts on the date you are otherwise eligible for Medicaid, meaning you’ve already spent down your remaining assets and are living in a facility that still needs to be paid for.² The transferred assets are gone, your other resources are depleted, and Medicaid won’t step in during the penalty window. This is the failure mode that catches people who form an LLC too late.

The Narrow Business Property Exception

There is one scenario where property held in an LLC might escape the asset count: when the LLC operates a genuine, active trade or business that supports the applicant. Under federal rules, property essential to self-support can be excluded. For income-producing property, up to $6,000 in equity is excluded if the property generates a net annual return of at least 6 percent on the excluded equity.³ Property used directly in a trade or business you operate, regardless of its value, may also qualify.

This exception is narrow and often misunderstood. Holding a rental property, vacation home, or stock portfolio inside an LLC does not qualify. The business must be real and active, and the applicant must be meaningfully involved in it. Any income the LLC distributes still counts as income for Medicaid purposes, which has its own separate limits. An LLC formed to warehouse passive investments under the label of a “business” will not survive review.

What Actually Protects Assets: The Irrevocable Trust

If an LLC doesn’t work, what does? The tool elder law attorneys most commonly use is a Medicaid Asset Protection Trust, a specific type of irrevocable trust. The difference comes down to one word: control.

With an LLC, you typically remain the owner and retain the power to manage, sell, or withdraw assets. That control is exactly what makes Medicaid count the assets as yours. An irrevocable trust flips the equation. You transfer assets into the trust and give up all ownership and control. An independent trustee manages the assets, and the trust terms prohibit distributions back to you, including for healthcare costs. Because you no longer have any legal right to reach the assets, Medicaid cannot count them.

The catch is the same five-year look-back. Funding an irrevocable trust is still a transfer for less than fair market value, and it will trigger a penalty if you apply for Medicaid within 60 months. The trust only works if the transfer happens more than five years before you need benefits. Assets that survive the look-back inside the trust are also generally protected from Medicaid estate recovery after death.

The trade-off is real. You genuinely lose access to those assets. You cannot change your mind, amend the trust, or force the trustee to return the money. If the trustee mismanages the funds, your recourse is limited. That surrender of control is why the trust works where the LLC does not. Anyone considering this route needs an attorney who specializes in elder law and Medicaid planning in their state, because the rules for what makes a trust effective vary significantly by jurisdiction.

Transfers That Don’t Trigger Penalties

Not every transfer during the look-back period is penalized. Federal law carves out specific exceptions:

Transfers to a spouse, or to someone else for your spouse’s sole benefit.
Transfers of your home to a child who is under 21, blind, or permanently disabled; to a sibling with an existing equity interest who lived in the home for at least one year before you entered a facility; or to an adult child who lived in the home and provided care that kept you out of a facility for at least two years.
Transfers into a trust established solely for the benefit of a disabled child or a disabled individual under 65.
A full return of the transferred assets, which removes the penalty.

These exceptions are precisely defined and states interpret them strictly.² Moving assets into an LLC does not fit any of them.

Estate Recovery After Death

An LLC also fails to close the second gate. Federal law requires every state to seek recovery of Medicaid costs from the estates of recipients who were 55 or older when they received benefits. At minimum, states must recover for nursing facility services, home and community-based services, and related hospital and prescription drug costs.²

The baseline “estate” is the probate estate, but federal law lets states expand the definition to include any real or personal property in which the deceased had any legal title or interest at death, including property that passes outside probate through joint tenancy, survivorship, life estates, or living trusts.² A number of states have adopted this expanded definition. In those states, an LLC membership interest you still hold at death is an asset the state can target for recovery.

Why Timing Is Everything

The five-year look-back is the single most important constraint in Medicaid asset protection planning. Any strategy that involves moving assets works best when done years before nursing home care is needed. People who wait until a health crisis hits find that nearly every option either triggers a penalty or requires giving up assets they still need to live on.

That is where the LLC idea usually comes from. Someone facing an imminent need looks for a quick fix and assumes the same structure that shields business owners from lawsuits will also shield savings from Medicaid. It won’t. Medicaid’s rules were built to stop last-minute asset shuffling, and the penalty provisions are harsh enough that a failed attempt can be worse than doing nothing.

Effective planning usually starts in your 60s or early 70s, when long-term care is a future possibility rather than an immediate need. That timeline gives you room to fund an irrevocable trust, let the five-year window expire, and still keep enough assets outside the trust to cover living expenses in the meantime. Waiting until cognitive decline sets in or a placement is being discussed collapses the timeline and closes off most of the options that actually work.

1
Centers for Medicare & Medicaid Services. 2026 SSI and Spousal Impoverishment Standards
2
Office of the Law Revision Counsel. 42 USC 1396p – Liens, Adjustments and Recoveries, and Transfers of Assets
3
eCFR. 20 CFR 416.1222 – How Income-Producing Property Essential to Self-Support Is Counted