For most families in south central Pennsylvania, the largest threat to what they intend to leave behind is not taxation. It is the cost of long-term care, which can consume a lifetime of savings in a few years.
Planning works, but only when it starts early. Planning after a diagnosis, or after admission to a facility, leaves far fewer options.
How Long-Term Care Gets Paid For
There are essentially three sources. Private funds, which is how most people begin. Long-term care insurance, which relatively few people carry and which must be purchased while still healthy enough to qualify. And Medicaid, which pays for a substantial share of nursing home care nationally.
Medicare is not one of them in any meaningful way. Medicare covers limited skilled nursing following a qualifying hospital stay, for a short period. It does not pay for long-term custodial care, and families who assume otherwise are frequently surprised at exactly the wrong moment.
The Five-Year Lookback
When applying for Medicaid to cover nursing facility care, the state reviews financial transactions over the preceding five years.
Assets transferred for less than fair market value during that window generate a penalty period, calculated by dividing the value transferred by the average monthly cost of care. During the penalty period, the applicant is ineligible, even though the assets are already gone.
This is what makes crisis transfers counterproductive. Giving the house to the children the month before applying does not protect it. It creates a period of ineligibility during which the family has neither the asset nor the coverage.
Transfers made more than five years before the application generally fall outside the lookback entirely, which is why timing matters more than the technique.
How the Home Is Treated
The primary residence is generally an exempt resource for eligibility purposes up to an equity limit, particularly where a spouse or certain dependent relatives continue to live there, or where the applicant intends to return home.
Exempt for eligibility is not the same as protected. Pennsylvania operates an estate recovery program that seeks reimbursement from the estate of a deceased Medicaid recipient, and the home is typically the asset it reaches.
This is the outcome families most often do not anticipate. The house was not counted during the application, so everyone assumed it was safe. After death, the Commonwealth presents a claim against the estate for the care provided.
The Community Spouse
When one spouse enters a facility, and the other remains at home, rules exist to prevent the at-home spouse from being impoverished.
The community spouse may retain the home, one vehicle, personal belongings and a share of the couple’s countable resources up to a limit adjusted periodically. They may also be entitled to a portion of the institutionalized spouse’s income where their own income falls below a defined level.
These figures change, and the calculations are more involved than they appear. A couple who assumes they must spend everything down before either qualifies is frequently mistaken, and that assumption costs real money.
Irrevocable Trusts
An irrevocable trust, established and funded more than five years before an application, can place assets outside what is counted for eligibility and outside what estate recovery reaches.
The word irrevocable is doing real work. To achieve that protection, the person must genuinely give up control—no ability to revoke it, no unrestricted access to the principal. Retaining too much control defeats the purpose entirely, and trusts drafted to preserve control usually do not work.
A common structure allows the person to receive income while the principal is protected, and permits continued residence in a home held by the trust. It also preserves a stepped-up basis for the beneficiaries in circumstances where an outright gift would not.
This is a substantial decision, not a technical one. Anyone considering it should be genuinely comfortable with giving up control, and it is not right for everyone.
Estate Recovery and What It Reaches
Pennsylvania’s estate recovery program pursues reimbursement from the probate estate of a deceased Medicaid recipient aged fifty-five or older who received nursing facility or related services.
Because it reaches the probate estate, assets that pass outside probate are generally beyond it. Property held jointly with right of survivorship, assets in a properly structured irrevocable trust, and accounts with beneficiary designations typically do not form part of the probate estate.
That distinction underpins much of the planning in this area. It also means that how assets are titled matters as much as what the will says, and a plan that addresses one without the other is incomplete.
Certain hardship exceptions and deferrals exist, including where a surviving spouse or a dependent relative continues to occupy the home. They are applied for rather than granted automatically.
Filial Support Is Not Theoretical in Pennsylvania
Pennsylvania is one of a small number of states with a filial support statute that has actually been enforced.
The law permits a care provider to pursue a child for a parent’s unpaid nursing home bill in defined circumstances, and Pennsylvania appellate courts have upheld such claims. This is not a historical curiosity — facilities have used it.
That reality raises the stakes for families here beyond what applies in most states. A failed Medicaid application or an uncovered gap does not simply exhaust the parent’s assets; it can reach the children.
Spend Down Is Not the Only Option
Families frequently assume that qualifying for Medicaid means spending everything until nothing is left. That is not accurate, and several categories of spending preserve value rather than destroying it.
Funds can pay off a mortgage or other debt, make repairs and improvements to an exempt home, purchase an exempt vehicle, prepay funeral and burial expenses through an irrevocable arrangement, and buy certain annuities that convert countable resources into an income stream.
Each of these has requirements and pitfalls, and doing them incorrectly can create the very penalty the family was trying to avoid. But the idea that the only option is writing cheques to a facility until the account is empty is simply wrong.
Powers of Attorney Are the Foundation
You can’t do any of this planning for someone who has already lost capacity unless a properly drafted power of attorney is in place.
Pennsylvania has strict execution requirements, and the document must specifically grant authority for the significant powers involved in this kind of planning, including making gifts and creating or funding trusts. A general power of attorney without that express authority will not support the steps that need to be taken.
Families who wait until a diagnosis has progressed frequently find the window has closed, and the alternative is a guardianship proceeding that is public, slow, and expensive. Getting the documents right is the prerequisite for everything else.
Why Gifting Rarely Works
Transferring the house to children during life seems like the obvious solution and it carries consequences people do not anticipate.
It creates a lookback penalty if done within five years. It gives the children the original cost basis rather than a stepped-up basis at death, which can produce a substantial capital gains bill on sale. It exposes the property to the children’s creditors and divorces. And it removes the parent’s control over their own home.
There are circumstances where lifetime gifting is appropriate, but it should be a considered decision within a plan rather than a reflex.
If you are thinking about long-term care planning for yourself or a parent in the Chambersburg or Harrisburg area, the useful time to do it is before anyone needs care. Call Mooney Law and we will tell you honestly what is still available.
