To get a parent or spouse onto long-term care Medicaid, a single applicant generally has to reach countable assets at or below $2,000 and monthly income at or below $2,982 in 2026. Most families reach those numbers through deliberate, lawful steps, not by giving money away or going broke first. That is Medicaid planning: the moves that qualify you without wasting savings on care Medicaid would have covered. This guide explains the strategies that work, the ones that need a specialist, and the mistakes that create penalties worse than paying out of pocket.

In This Guide

Why Families Turn to Medicaid Planning

Most families reach Medicaid planning under stress, often after a diagnosis or a fall that means a parent can no longer manage at home, and they discover that long-term care is expensive. The national median cost of a semi-private nursing home room was about $114,975 per year, or roughly $9,581 a month, in the CareScout 2025 Cost of Care Survey; assisted living ran about $6,200 a month and a non-medical home caregiver about $35 an hour. Medicare pays for up to 100 days of skilled-nursing rehabilitation and nothing for ongoing custodial care, so the cost of long-term care falls to the family until savings run down.

Medicaid will not pay while a family still has the resources to pay privately. Planning is the set of lawful steps that convert countable assets into exempt ones, or transfer them far enough in advance that they no longer count. Done well, it protects a surviving spouse, preserves the home for a qualifying child, and qualifies the applicant without wasting savings on care Medicaid would have covered. Done poorly, it creates a penalty period during which no one pays for care at all.

The Key 2026 Numbers

These are the federal figures that govern long-term care Medicaid eligibility in 2026. States may set their own standard within a federal range where one applies.

Figure 2026 amount
Applicant countable asset limit $2,000
Special income limit (300% of SSI FBR) $2,982/month
SSI federal benefit rate (individual) $994/month
Community Spouse Resource Allowance (CSRA) $32,532 to $162,660
Minimum Monthly Maintenance Needs Allowance $2,705.00/month
Maximum Monthly Maintenance Needs Allowance $4,066.50/month
Home equity cap $752,000 to $1,130,000
Home equity cap (flat, from January 1, 2028) $1,000,000

The asset limit and the $2,982 special income limit are derived from the 2026 SSI federal benefit rate of $994 a month. The spousal figures are set under the spousal-impoverishment provisions of 42 U.S.C. 1396r-5. The home equity range and the 2028 change are set under 42 U.S.C. 1396p(f) and the 2025 amendment described below.

Which Assets Can You Keep?

Medicaid divides everything you own into countable and exempt assets, and only countable assets are measured against the $2,000 applicant limit.

Countable assets are anything that can be converted to cash and used for care: checking and savings accounts, certificates of deposit, stocks, bonds, second homes, investment property, and cash-value life insurance. Individual retirement accounts and 401(k)s are countable in most states, though some treat an account in required-minimum-distribution payout status differently.

Exempt assets are not counted toward eligibility. They fall into a short list:

  • The primary residence, as long as the applicant intends to return home or a spouse, minor child, or disabled child lives there, subject to the equity cap below.
  • One vehicle, regardless of value, used for transportation of the applicant or a household member.
  • Personal effects and household goods: furniture, clothing, appliances, and personal-use jewelry.
  • Prepaid irrevocable funeral and burial contracts, within limits that vary by state.
  • Term life insurance with no cash value, and certain small whole-life policies.
  • Business and income-producing property essential to self-support.

The treatment of a retirement account is one of the largest sources of state variation, so a household with a significant IRA or 401(k) should confirm its own state's rule before assuming the account is safe.

How Much Home Equity Is Too Much?

The primary residence is exempt up to a home equity cap. For 2026, federal law sets that cap between a minimum of $752,000, which every state must allow, and a maximum of $1,130,000 that a state may elect, indexed annually to the Consumer Price Index under 42 U.S.C. 1396p(f). Most states apply the federal minimum; a minority of higher-cost states elect the maximum.

Equity above the cap is a countable asset. In a state using the $752,000 minimum, any home equity above that figure counts toward the asset limit and can disqualify the applicant until the excess is reduced, even though the home itself remains exempt.

Starting January 1, 2028, H.R. 1, the One Big Beautiful Bill Act of 2025 (Public Law 119-21, signed July 4, 2025), at Section 71108, replaces the indexed cap with a flat $1,000,000 ceiling for non-agricultural homes, with no further inflation indexing; homes on land zoned for agricultural use stay under the existing indexed rules. Families in the higher-cap coastal states should treat 2028 as a firm planning deadline, because those states lose the ability to protect equity above $1,000,000.

How Far Back Does Medicaid Look?

When someone applies for long-term care Medicaid, the state reviews the previous 60 months (5 years) of financial records for any transfer made for less than fair market value. Gifts, below-market sales, and money moved into a trust all count. The authority is 42 U.S.C. 1396p(c), applied to transfers on or after February 8, 2006. California is the exception: effective January 1, 2026, Medi-Cal applies a 30-month look-back for nursing-facility care and counts only transfers made on or after January 1, 2026.

A transfer made for fair market value, or for other valuable consideration, is not penalized; only uncompensated or under-compensated transfers create a penalty.

When Does the Penalty Period Start?

This is the rule families most often get wrong. The penalty period does not begin on the date of the gift. For transfers on or after February 8, 2006, it begins on the later of the transfer date or the date the applicant is otherwise eligible for Medicaid and receiving institutional-level care. So a family that gave money away two years ago has not run out the clock the way they assume, and that same start-date rule is exactly what makes some crisis strategies work.

The length of the penalty is the total uncompensated value of the gifts divided by the state's average monthly private-pay cost of nursing-facility care, which produces the number of months the applicant is ineligible. Each state publishes its own penalty divisor, so the months depend on local nursing-home costs. An undue-hardship waiver is available under 42 U.S.C. 1396p(c)(2)(D) when imposing the penalty would deprive the applicant of medical care or the necessities of life, but states grant it rarely and case by case.

How Do You Protect the Healthy Spouse?

Spousal-impoverishment rules, in place since 1988, prevent a healthy spouse from being driven into poverty when the other spouse enters a nursing home. Two allowances do most of the work, and both are available the moment the institutionalized spouse needs care, with no advance trust required.

Community Spouse Resource Allowance (CSRA)

The community (healthy) spouse keeps a portion of the couple's combined countable assets. In 2026, that protected amount is at least $32,532 and up to $162,660, with each state electing a standard inside that federal range. These figures are set under 42 U.S.C. 1396r-5.

Monthly Maintenance Needs Allowance (MMNA)

If the community spouse's own monthly income is low, part of the institutionalized spouse's income can be shifted to them. The 2026 Minimum Monthly Maintenance Needs Allowance is $2,705.00 a month, effective July 1, 2026 through June 30, 2027, and the maximum Monthly Maintenance Needs Allowance is $4,066.50 a month, effective January 1, 2026. A fair hearing can raise the allowance further when the community spouse has documented high housing costs.

Getting a clear picture of what counts and what is exempt for your specific household is the first real step. If you are weighing whether to apply now or spend down first, talk to Brevy. Brevy's care navigator can walk through your state's rules and point you to a local elder-law attorney if the situation warrants one.

These approaches convert countable assets into exempt ones or into services the applicant would have bought anyway. They carry no transfer penalty because fair value is received.

Pay off debt. Paying existing legitimate debt, such as a mortgage, credit cards, medical bills, or a car loan, reduces countable assets dollar for dollar with no transfer penalty.

Make home modifications and repairs. A new roof, a wheelchair ramp, a walk-in shower, an HVAC replacement, or a stair lift converts cash into equity in the exempt primary residence. Document every dollar with receipts.

Prepay an irrevocable funeral contract. Most states allow a prepaid funeral and burial contract within a state-set limit. The contract must be irrevocable and name the funeral provider; a revocable policy is still countable.

Purchase exempt items. Replacing an aging vehicle, buying medical equipment and mobility aids, or updating hearing aids and dentures all reduce countable assets. Keep the receipts.

Pay for care privately during planning. Home care hours, adult day-care fees, in-home therapy, and medical expenses all legitimately reduce countable assets.

Use a written caregiver agreement. A family member can be paid to provide care under a formal, signed agreement that predates the services, specifies duties and rates, tracks hours, and pays at market rate. Without the written agreement, the payments look like gifts and trigger the transfer penalty.

Spending Down in Medically-Needy States

Many states run a medically-needy program that lets applicants whose income is above the special income limit qualify by spending the excess on medical bills each period before Medicaid pays. States that do not offer a medically-needy pathway, often called income-cap states, require applicants over the income limit to route income through a Miller Trust (Qualified Income Trust) to become eligible. See Medicaid spend-down explained for how the monthly calculation works.

Grey-Zone Strategies That Need an Attorney

These are legal in the right circumstances but easy to misuse. None should be attempted without an elder-law attorney.

Medicaid-compliant annuities. A single-premium immediate annuity structured to meet federal requirements converts a lump of countable assets into an income stream for the community spouse. To avoid a transfer penalty, the annuity must be irrevocable and nonassignable, actuarially sound, pay in equal amounts with no deferral or balloon payments, and name the state as remainder beneficiary in the first position for at least the total Medicaid assistance paid for the institutionalized individual. Done wrong, it counts as a transfer and triggers a penalty.

Promissory notes. A note drafted to meet the applicable federal requirements can be recognized as a legitimate asset conversion rather than a gift, provided the borrower gives fair value in return. The drafting details control whether it qualifies, so this is attorney territory.

Special needs trusts. A first-party special needs trust under 42 U.S.C. 1396p(d)(4)(A) shelters the assets of a disabled person under age 65, but only if the state is repaid from the trust at the person's death up to the total Medicaid it paid. A pooled trust under 42 U.S.C. 1396p(d)(4)(C), managed by a nonprofit, can hold a sub-account for a disabled person of any age, though the federal transfer-penalty exception for funding a trust is keyed to age under 65, so funding a pooled sub-account at or after age 65 can be treated as an uncompensated transfer.,

Irrevocable asset-protection trusts. Assets moved into an irrevocable trust more than 60 months before application do not count toward eligibility, provided the applicant cannot reach the principal. This is the strategy most associated with the 5-year rule; it offers the strongest protection but needs the longest lead time.

What Counts as Illegal

These moves are clearly prohibited and frequently prosecuted.

Hiding assets. Failing to disclose accounts, property, or transfers is Medicaid fraud and can carry fines, disqualification, and criminal exposure.

Transfers after application. Moving assets during the application process or after becoming eligible is fraud, not planning.

Backdated or sham caregiver agreements. An agreement dated last year but signed today, or one that pays a non-caregiving relative, is treated as an uncompensated transfer.

Misusing the caregiver-child transfer. The caregiver-child exception lets a parent transfer the home, without a penalty, to a son or daughter who lived in the home for at least two years immediately before the parent was institutionalized and who provided care that allowed the parent to stay home. A transfer to a child who did not live in the home and provide that care is treated as a gift.

Estate Recovery: The Backside of Planning

Qualifying for Medicaid is not the end of the asset question. Under the federal Omnibus Budget Reconciliation Act of 1993, at 42 U.S.C. 1396p(b), every state must operate a Medicaid Estate Recovery Program (MERP) that recovers payments from the estate of a deceased enrollee who was 55 or older when they received nursing-facility services, home and community-based services (HCBS), and related hospital and prescription-drug services.

Some states limit recovery to the probate estate, including Texas, Florida, and California; others use an expanded definition that reaches jointly held assets, life estates, and living-trust assets outside probate. State minimum thresholds vary: Texas does not pursue recovery from estates under $10,000, and Georgia waives recovery against the first $25,000 of any estate for deaths on or after July 1, 2018.

Recovery may be made only after the death of a surviving spouse, and only when there is no surviving child who is under age 21 or who is blind or permanently and totally disabled. The planning implication is direct: sheltering assets into eligibility does not shelter them from MERP unless those assets also pass outside the state's recoverable-estate definition. See Medicaid estate recovery explained for the full federal framework.

When Do You Actually Need an Attorney?

A single applicant with modest assets, no home, and no gifts in the past five years can often apply without professional help, or use free counseling through a local Area Agency on Aging. Referral-funded sites rarely say so, but many simple cases do not need a paid engagement.

Hire an elder-law attorney if any of the following apply:

  • Combined countable assets well above the applicant limit
  • A home with equity above the state cap
  • A married couple where one spouse needs care and the other does not
  • Gifts, transfers, or below-market property sales in the past five years
  • A retirement account your state counts
  • A family business, farm, or rental property
  • A complex second-marriage or blended-family situation
  • An irrevocable trust already in place

To find a credentialed specialist, look for a Certified Elder Law Attorney (CELA) through the National Academy of Elder Law Attorneys (NAELA). For the lower-cost paths, find your Area Agency on Aging through the federal Eldercare Locator or 1-800-677-1116, and ask about state bar lawyer-referral services and legal-aid organizations for seniors.

Frequently Asked Questions

How far in advance should I start Medicaid planning?

Ideally about five years before you expect to need nursing-home care, because the look-back is 60 months and transfers made more than five years before application fall outside it entirely. In practice most families start one to two years out, and an attorney works with the time available, usually a mix of exempt-asset conversions and a shorter-horizon annuity or promissory-note strategy.

Can I give my kids the annual tax-free gift amount without a Medicaid penalty?

No. The IRS annual gift-tax exclusion is a tax rule, not a Medicaid rule. Medicaid counts any uncompensated transfer made during the look-back period, regardless of size, so a gift that is fine for gift-tax purposes is still a penalizable transfer for Medicaid.

Does Medicaid take my house?

Not while you are alive. The home is exempt during your lifetime if you, a spouse, or a dependent relative lives there, or if you intend to return. After death, the Medicaid Estate Recovery Program may file a claim for the benefits paid on your behalf, though protections exist for a surviving spouse or a disabled child.

What happens if I am denied for a transfer penalty?

You can pay privately during the penalty period and begin Medicaid coverage after it expires, because the penalty runs for a set number of months rather than forever. You can also appeal and request an undue-hardship waiver if the denial would deprive you of medical care or the necessities of life, though approvals are uncommon.

Can I just put my assets in my spouse's name?

Moving assets into a spouse's name generally does not trigger the transfer penalty, but it does not help if both spouses eventually need long-term care, and it does not change what the couple owns jointly for eligibility purposes. The spousal-impoverishment allowances, not a name change, are the real protection for a married couple: in 2026 the community spouse keeps between $32,532 and $162,660 in countable assets under the CSRA.

Learn More

MedicaidMedicaid Estate Recovery ExplainedMedicaid estate recovery explained: federal law, 51-state matrix, categorical protections, hardship waivers, and 2025-2026 reform updates. Verify before acting. MedicaidMedicaid Spend-Down ExplainedMedicaid spend-down lets people whose income is over the limit qualify by applying medical bills to the excess. Here is how the medically needy path works. MedicaidMiller Trust / Qualified Income TrustA Miller Trust lets people with income above Medicaid's limit qualify for long-term care in income-cap states. Here's how it works and who needs one. MedicaidNursing Facility Level of Care (NFLOC)NFLOC is the clinical determination that someone needs nursing-home level support. It's the gateway to Medicaid long-term care. Here's how the assessment works. MedicaidHCBS WaiverAn HCBS waiver lets Medicaid pay for home and community care instead of a nursing home. Here's how 1915(c) waivers work, what they cover, and the waitlist. MedicaidNursing Home Medicaid in TexasTexas Medicaid pays for nursing home care with no waitlist. See the 2026 income ($2,982) and asset ($2,000) limits and what the at-home spouse gets to keep. MedicaidNursing Home Medicaid in MichiganMichigan Medicaid nursing home coverage in 2026: income and asset limits, the medically-needy spend-down, the 5-year look-back, and estate recovery.

Find personalized help planning for Medicaid long-term care at brevy.com.

The information on Brevy.com is for educational purposes only and is not a substitute for professional legal, financial, or medical advice. Rules vary by state and program and change frequently. Always verify with the relevant agency or a qualified professional. Brevy is not a law firm, financial advisor, or healthcare provider.

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Brevy Care Team

Expert eldercare guidance from Brevy's team of healthcare professionals and researchers.