Medicaid spend-down is the process of reducing countable assets to meet Medicaid's financial eligibility requirements for long-term care coverage. Most states require applicants to have no more than $2,000 in countable assets (some states allow more).
10 steps across 1 sections
1. Steps Guide
- Understand your state's Medicaid rules — Asset limits, income limits, look-back periods, and covered services vary significantly by state. Some states have expanded Medicaid programs with higher li...
- Identify countable vs. exempt assets — Exempt assets typically include the primary home (up to $713,000 in equity in most states for 2026), one vehicle, personal belongings, prepaid funeral/burial ...
- Consult an elder law attorney — Medicaid planning involves complex legal and financial strategies. An attorney specializing in elder law can identify legitimate options and prevent costly mistakes ...
- Review the 5-year look-back — Medicaid examines all financial transactions from the 60 months (36 months in some states) prior to the application date. Gifts, transfers below fair market value, and...
- Implement legitimate spend-down strategies — Approved methods include paying off debts (mortgage, car loans, credit cards), making home modifications for accessibility, prepaying funeral and burial...
- Protect the community spouse — The Community Spouse Resource Allowance (CSRA) allows the non-applicant spouse to retain approximately $154,140 (2026) in assets and a minimum monthly income allowance.
- Consider a Medicaid-compliant annuity — Converting countable assets into an income stream through an irrevocable, non-transferable annuity that names the state as remainder beneficiary can achieve ...
- Establish a qualified income trust if needed — In "income cap" states, a Miller Trust (Qualified Income Trust) channels excess income into a trust that Medicaid doesn't count.
- Apply for Medicaid — Submit the application with complete financial documentation. Be prepared for the eligibility determination process to take 45-90 days.
- Maintain eligibility — Once approved, report changes in income, assets, or living situation. Medicaid conducts annual redeterminations.
Common Mistakes
- Gifting assets within the look-back period
- Attempting DIY planning
- Hiding assets
- Ignoring the community spouse's rights
- Waiting until a crisis to plan
Pro Tips
- Start planning early
- Use the home exemption strategically
- Prepay funeral expenses
- Understand the half-a-loaf strategy
- Look into Medicaid waiver programs
Sources
- How Medicaid Spend Down Works — Medicaid Planning Assistance
- Medicaid Spend Down Strategy — U.S. News
- Medicaid Spend Down Strategies — Elder Law Guidance
- Common Medicaid Planning Strategies — ElderLife Financial
- Spending Down for Medicaid — AgingCare
- Spend Down Strategies and Long Term Care — Alatsa Law Firm