Medicaid and nursing home planning.

The basics.

Medicare covers only short stays in a skilled nursing facility. Long-term nursing home care is paid for by private funds or, for those who qualify, by Medicaid. To qualify in Texas, an applicant must meet medical need standards and financial limits.

The financial tests.

• Assets: a single applicant is generally limited to about $2,000 in countable resources. Many assets are exempt, including a primary home (within an equity limit), one vehicle, and personal belongings.
• Income: Texas applies an income cap for nursing home Medicaid. Applicants above the cap generally need a qualified income trust, often called a Miller trust, to qualify.
• Spouses: a spouse living at home (the "community spouse") is allowed to keep a protected share of assets and some income, so the healthy spouse is not left impoverished.

The five-year look-back.

When you apply, Medicaid reviews financial transactions during the prior 60 months. Gifts or transfers for less than fair value during that period can result in a penalty period, during which Medicaid will not pay for nursing home care. The penalty is calculated by dividing the amount transferred by a state-set average monthly cost. Some transfers are exempt, such as transfers to a spouse or to a disabled child.

Planning tools.

• Medicaid asset protection trust: an irrevocable trust that, once past the look-back, can protect assets — see our Medicaid asset protection trust page
• Spend-down on exempt assets: paying off debt, repairing the home, or buying exempt items
• Qualified income trust: when income exceeds the cap
• Powers of attorney: so someone can apply and manage assets if you are incapacitated

Estate recovery.

After a Medicaid recipient dies, Texas may seek to recover certain costs from the estate, with protections for a surviving spouse and some dependents. Planning can reduce what is exposed. Rules are technical, change over time, and depend on your situation.