An Overview of Common Medicaid Planning Approaches

There is no single “Medicaid plan.” There is a toolbox of lawful approaches, and a good plan picks the few that fit a family’s state, timing, health and goals. This guide gives a plain-language overview of the most common approaches, grouped by what they do, with links to a full guide on each one.

Figures change periodically. Double-check current amounts before relying on them.

Three questions that shape every plan

Before looking at any specific strategy, three questions decide which tools are even available.

How soon is care needed? If care is five or more years away, strategies that rely on the five-year look-back running out become possible. If care is needed now, the plan relies on spend-down, conversions and allowed transfers.
Is the applicant married? The spousal impoverishment rules protect a large share of a couple’s assets and income for the spouse at home. Married applicants usually have more options than single ones.
Which state, and which program? Asset limits, income rules, home equity limits, penalty divisors, estate recovery and the treatment of annuities and trusts vary by state. Nursing home Medicaid and home and community-based waivers can also have different rules. Each state guide lists that state’s 2026 figures.

Group 1: Using what the rules already exempt

The simplest planning is making sure nothing is counted that should not be.

The home. A primary residence is usually exempt within the state’s home equity limit ($752,000 to $1,130,000 in 2026) if the applicant lives there, intends to return, or a spouse or certain relatives live there. See When the home is exempt.
One vehicle. Generally one car is exempt regardless of value. See Cars and other vehicles.
Personal and household goods. Furniture, clothing and ordinary belongings are not counted.
Burial funds and plots. Many states exclude a small burial fund and burial spaces, and an irrevocable funeral trust is usually exempt.
Retirement accounts. Treatment varies. In some states an IRA in payout status is not counted as an asset, though the payments count as income. See Retirement accounts.
Small life insurance. Many states exclude whole life policies with a small combined face value. See Life insurance.

Group 2: Spending down the right way

When countable assets are over the limit, spending them on the applicant’s (and spouse’s) own needs is allowed, so long as the person receives fair value. Common examples:

paying off a mortgage, car loan or credit card;
home repairs and improvements, such as a new roof, furnace, ramp or accessible bathroom;
buying a more reliable car;
prepaying funeral and burial costs;
buying hearing aids, dentures, eyeglasses, a wheelchair or other equipment;
paying for care privately for a time.

See How the spend-down works and Allowed and not-allowed spend-down purchases.

Group 3: Protecting the spouse at home

For married couples, the most important planning is often just applying the spousal rules correctly.

CSRA: the spouse at home keeps a share of the couple’s countable assets, between $32,532 and $162,660 in 2026 depending on the state’s method.
MMMNA: if the spouse at home has low income, part of the applicant’s income can be redirected to them, up to $4,066.50 a month in 2026.
Raising the allowances: a fair hearing can sometimes increase the CSRA or MMMNA.
Spending on the spouse at home: buying a car, repairing the home or paying the couple’s debts.
Annuity for the spouse at home: in many states, excess assets can be turned into an income stream for the spouse at home with a compliant annuity.
Spousal refusal and, rarely, Medicaid divorce are last-resort options in some states.

Group 4: Converting assets into income or exempt forms

Medicaid-compliant annuities turn a lump sum into monthly payments. If the annuity meets the federal rules, buying it is not a gift, and the lump sum stops counting as an asset. The payments count as income.
Irrevocable funeral trusts turn cash into a prepaid funeral that does not count.
Promissory notes that meet federal rules can sometimes be used in a similar way, mainly in “half a loaf” plans.

Group 5: Allowed transfers and gifts

Some transfers never cause a penalty, no matter when they happen. They include transfers to a spouse, to a blind or disabled child, to certain trusts for a disabled person under 65, and of the home to a caregiver child or a sibling who meets the rules. See Exempt transfers.

Other gifts do cause a penalty if made within the look-back, but sometimes a family chooses to make a gift on purpose and pay the penalty with other funds. That is the idea behind “half a loaf”: give away part of the money, and use the rest (often with an annuity or note) to pay for care during the penalty period.

Group 6: Trusts

Medicaid asset protection trust: an irrevocable trust that holds assets so they no longer count, once five years have passed since funding.
Qualified income (Miller) trust: required in many states when income is over the cap; it does not protect assets.
Special and supplemental needs trusts: hold money for a disabled person without affecting their benefits.
Revocable living trusts: useful for avoiding probate, but they do not protect assets from Medicaid. See Revocable vs. irrevocable trusts.

An attorney prepares every trust.

Group 7: Paying family caregivers

A written personal care agreement lets a parent pay a child or other relative a fair rate for care going forward. Properly done, those payments are compensation, not gifts. Many states also let family members be paid through Medicaid itself; see Getting paid as a family caregiver.

Group 8: Insurance

Long-term care insurance can pay for care before Medicaid is needed and buy time for the look-back.
Partnership policies add a special benefit: for every dollar the policy pays, a dollar of assets can be protected from Medicaid’s asset test and, generally, from estate recovery.

Group 9: Documents that make planning possible

Durable powers of attorney let a trusted person carry out a plan if the applicant can no longer act. A power of attorney that does not allow gifts or trust funding can block planning later.
Estate planning keeps an inheritance from knocking a spouse or disabled relative off Medicaid, and looks ahead to estate recovery.
Lady Bird deeds, where state law allows them, can pass a home outside probate and in some states outside estate recovery.

Comparing the approaches

Approach	Best timing	Protects assets?	Main trade-off
Using exemptions	Any time	Yes	Limits vary by state
Spend-down	Any time	Converts to useful items	Money is spent
Spousal allowances	At application	Yes, for the spouse	Only for married couples
Compliant annuity	Crisis	Converts to income	Income counts; state is a remainder beneficiary
Funeral trust	Any time	Yes (funeral only)	Irrevocable
Half a loaf	Crisis	Part of assets	Penalty period must be planned for
Asset protection trust	5+ years before care	Yes, after 5 years	Loss of control of principal
Miller trust	When income is over cap	No	Income goes to care costs
Caregiver agreement	Before or during care	Yes, if fair value	Payments are taxable income to the caregiver
Partnership insurance	Years before care	Yes, dollar for dollar	Premiums; must qualify medically

Putting it together: two short examples

A single person in a crisis. Margaret, 88, enters a nursing home with $80,000 in savings. Her plan uses the exemptions first (her car and a small life insurance policy), then allowed spend-down (a funeral trust, dental work and a new wheelchair). In her state, the family then considers a half-a-loaf approach for what is left. Every step is documented for the application.

A married couple planning ahead. Frank, 72, and Joan, 70, are healthy. Their plan starts with durable powers of attorney and a review of their wills, so that if one dies, the inheritance does not disrupt the other’s eligibility. They look at a partnership long-term care policy and decide to put their vacation home in an asset protection trust, starting the five-year clock now.

Why professional help matters

Many of these approaches interact. An annuity can change income and the patient liability. A gift can trigger a penalty that has to be paid for. A trust can affect taxes. Getting the order and timing right is where most of the value lies, and where most do-it-yourself plans go wrong. A Certified Medicaid Planner can look at the whole picture and coordinate with an attorney, who prepares the legal documents. See Questions to ask before paying anyone for help.

Frequently asked questions

Which approach is “best”? None in general. The best plan uses the fewest tools needed to meet the family’s goals under its own state’s rules.

Do these strategies work for home care as well as nursing homes? Many do. Waiver programs usually use the same asset rules and look-back, though some states do not apply a look-back to certain community programs.

Can several approaches be combined? Yes, and most real plans combine two or three.

Last updated for 2026. General information only, not legal or financial advice. Medicaid Answers is a free educational resource published by Medicaid Answers Foundation.