Medicaid Planning Strategies: Simple Approaches to Help Qualify

Last updated: January 11, 2021



There are many income and asset planning techniques used to qualify for Medicaid when one is over the limit(s). Some are exceedingly complex, while others are surprisingly simple. Our intention is not to include them all here, but to include those that are relevant to individuals looking for the most affordable way to qualify for Medicaid. Most of the techniques described below can be undertaken with little to no financial or legal assistance. One can also find the most affordable option for getting planning assistance.

  Qualifying for Medicaid can be a minefield. Professionals help families get the care they require. Learn more.


Asset Planning Strategies


Irrevocable Funeral Trusts

These are trusts set up for the purpose of paying for the Medicaid applicant’s funeral in advance. For applicants who have assets exceeding the countable limit, establishing an irrevocable (it cannot be changed or canceled) funeral trust can reduce their countable assets by up to $15,000 (or up to $30,000 for married couples). At the same time, setting up this type of trust prevents one’s family members from having to shoulder the financial burden of a funeral and burial. The process of establishing an irrevocable funeral trust is fast, simple, and no legal fees are required.

 *Caution* There are many other options available to pre-pay for a funeral that sound similar but aren’t Medicaid exempt.


Spousal Asset Transfers

When only one spouse of a married couple is applying for nursing home Medicaid or a Home and Community Based Services (HCBS) Medicaid Waiver, certain spousal protections apply to ensure the community spouse (the spouse who continues to live at home) does not become impoverished. In 2021, the community spouse, also referred to as the well spouse, is permitted up to $130,380 in countable assets, while the Medicaid applicant is only allowed an approximate $2,000. Please bear in mind that not all states use the abovementioned figures. For instance, South Carolina only allows the community spouse to retain assets up to $66,480, and Illinois only permits the well spouse up to $109,560 in assets. New York allows applicants up to $15,750 in assets, and Connecticut only allows applicants assets up to $1,600. (Click here to find asset limits for the applicant spouse and non-applicant spouse by state).

The amount of assets that the well spouse is able to retain, which includes mutually held assets, is called the Community Spouse Resource Allowance (CSRA). This allowance not only prevents the non-applicant spouse from having too little from which to live, but can also effectively lower the applicant’s resources, hopefully to a Medicaid compliant level. This common technique is fairly simple, encouraged by Medicaid, and should require little to no outside assistance.



For married couples in which only one spouse is applying for nursing home Medicaid or a HCBS Medicaid waiver, an annuity is a good option. This planning technique turns countable assets into non-countable income for the non-applicant spouse. In simple terms, a lump sum of money is paid to an insurance company, which in turn, will pay the healthy spouse a monthly payment. Annuities must be irrevocable (impossible to alter or terminate), must be immediate (payments start right away), and the monthly payments must not exceed the life expectancy of the recipient. Spousal annuities are not an option in all states.

For single applicants, an annuity is also a possibility. However, the income generated from the annuity is counted towards Medicaid’s income limit. Therefore, this is not always the best option or even a feasible one.  More on annuities.


Spend Down Excess Assets

There are several ways in which one is able to spend down assets in order to reach the Medicaid asset limit. Options include home modifications and improvements, such as adding a chair lift or putting on a new roof, purchasing medical devices that are uncovered by insurance, like dentures, and paying off one’s mortgage or credit card debt. It’s important to note, one may not give away assets or sell them way under market value, as this may result in a period of Medicaid ineligibility. This is known as the Medicaid look-back rule, which is a period of 60-months (30-months in California) preceding the date of one’s Medicaid application in which all past asset transfers are reviewed. (The look-back period is 30-months in California, and New York is in the process of implementing a 30-month look-back for long-term home and community based services).

  Our free spend down calculator is invaluable in assisting persons in determining if they might have an asset spend, and if so, the approximate amount. Find out here.  


Lady Bird Deeds

Lady bird deeds allow Medicaid applicants to protect their home for their adult children or other loved ones as an inheritance. With this type of life estate deed, the Medicaid recipient still has ownership over his or her home as long as he or she is living. However, upon his or her death, the home is automatically transferred to the named beneficiary, and is no longer owned by the deceased Medicaid recipient. Since the ownership of the home changes, it is not considered a part of the deceased Medicaid recipient’s estate. This protects it from Medicaid’s estate recovery program, in which states attempt to collect reimbursement of funds paid for long-term care. This planning strategy, which is very inexpensive, cannot be utilized in all states.  More on lady bird deeds.


Medicaid Divorces

Put simply, a Medicaid divorce is the legal termination of a marriage of a couple in which only one spouse is applying for long-term care Medicaid. While this strategy is used to protect assets for the non-applicant spouse, it also lowers the countable assets of the applicant spouse. However, since the establishment of spousal asset transfers (discussed above), Medicaid divorces are not nearly as common as previously. This is because the spousal resource allowance allows the community spouse to retain a higher portion of the couple’s assets, preventing spousal impoverishment. However, in the case where a couple has significant assets, generally over half a million dollars, a Medicaid divorce may still make sense. Getting a divorce may reserve a significantly greater amount of assets for the non-applicant spouse instead of using them towards the cost of long-term care. This strategy is complicated, depends on the divorce laws in the state in which one resides, and cannot be used in all states.


Spousal Refusal

Non-applicant spouses, while legally obligated to help cover the cost of Medicaid long-term care for their applicant spouses, can still refuse to make their assets available for this purpose. (Medicaid considers assets of either spouse as jointly owned for eligibility purposes). With “spousal refusal”, Medicaid cannot legally deny an applicant care when one’s spouse refuses to contribute towards care costs. Although uncommon, a state’s Medicaid agency can pursue a lawsuit against non-applicant spouses to collect reimbursement of long term care costs. This planning strategy has generally only been allowed in Florida and New York. More on Spousal Refusal.


Medicaid Asset Protection Trusts

A Medicaid asset protection trust (MAPT) is a type of irrevocable (irreversible) trust that protects assets from being counted towards Medicaid’s asset limit. These trusts also preserve assets for family and other loved ones as inheritance. Assets, which may include one’s home, are put into a trust and are no longer considered owned by the person who created the trust (the Medicaid applicant). While there is no limit as to the value of the assets that can be placed in this type of trust, a major shortcoming is that MAPTs are a violation of Medicaid’s look-back period. Violating the “look back” results in a penalty period of Medicaid ineligibility, and therefore, these trusts should only be utilized well in advance of the need for long-term care Medicaid. To be very clear, if it is thought that Medicaid will be needed in the near future, this strategy is not suggested.  More on MAPTs.


“Half a Loaf” Strategies

These strategies are gifting strategies intended to lower a Medicaid applicant’s assets, while preserving assets for loved ones as an inheritance. “Half a Loaf” strategies violate Medicaid’s look back period, resulting in Medicaid disqualification for a specific period of time. However, with advanced planning and correctly utilizing this strategy, the Medicaid applicant has the funds to pay for long-term care until the period of ineligibility is over. The most relevant “half a loaf” strategy is the modern half a loaf. (The original half a loaf is no longer used, and the reverse half a loaf is only utilized in a handful of states.) Overly simplified, with a modern half a loaf, a Medicaid applicant gives approximately half of their assets to family and purchases a Medicaid compliant annuity with the other half of their assets. The annuity creates an income stream, which is used to pay for long-term care during the Medicaid ineligibility period. This strategy is very complicated and professional assistance is highly recommended.

  A Word of Advice: While all of these planning techniques do not require professional Medicaid assistance, persons in doubt of the Medicaid rules in their state should strongly consider talking with a Medicaid planner. Incorrectly implementing a planning strategy can result in unknowingly violating Medicaid’s look back period, resulting in Medicaid disqualification. Find professional assistance here.  


Income Planning Strategies


Spousal Income Transfers

A similar technique to the one mentioned above for asset planning can be applied to a married couple’s income. Also a spousal protection rule, the non-applicant spouse or “well spouse” is entitled to a sufficient amount of monthly income to enable him or her to continue living at home. This is called the Minimum Monthly Maintenance Needs Allowance, or MMMNA, and allows applicant spouses to transfer their income to their non-applicant spouses. In 2021, the applicant spouse may transfer up to a maximum of $3,259.50 / month in income to the non-applicant spouse. (Illinois is an exception in that the maximum figure is $2,739.) This transfer of income also effectively lowers the applicant’s monthly income. (Learn more about how Medicaid counts income here.) This technique, which is commonly utilized and encouraged by Medicaid, is fairly straightforward and should require little to no outside assistance.


Qualified Income Trusts / Miller Trusts

For individuals who are not married or whose non-applicant spouse’s income exceeds the MMMNA, Qualified Income Trusts (QIT) offer another, slightly more complicated technique for helping the applicant to meet the Medicaid income limit. Income over the limit is allocated into a qualified irrevocable (unchangeable and uncancelable) income or Miller Trust, and is generally used to pay one’s medical bills and care. Often, the remaining money becomes the property of the state after the Medicaid applicant passes. However, typically these accounts are set up for just a few hundred dollars to be directly deposited each month, which in turn, allows the applicant to qualify for Medicaid and receive many thousands of dollars in care and support each month. QIT / Miller Trusts are not allowed in all states.  Read more on Miller Trusts / QITs.


Income Spend Down

Some states allow Medicaid applicants who are over the income limit to spend their “excess” income (the income over the established limit) on medical expenses. This strategy, an income spenddown program, is often referred to as the medically needy pathway. Persons become eligible for Medicaid once they have spent their income down to the income limit. This strategy is not complicated, and although not available in all states, is encouraged in the ones that allow it.

*More content will be added to this webpage as scheduling permits.


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