Medicaid Planning in Texas: How to Protect Your Assets

Medicaid Planning in Texas: How to Protect Your Assets

Medicaid is the primary way most Texas families pay for long-term nursing home care. But qualifying for Medicaid means meeting strict financial limits—and for many people, that feels like a choice between going broke or going without care.

It doesn't have to be that way. Medicaid planning is a set of legal strategies that can help you or your loved one qualify for benefits while protecting some of your hard-earned savings. It's perfectly legal, widely used, and—when done correctly—can make an enormous difference for your family.

How Medicaid Eligibility Works in Texas

To qualify for Medicaid long-term care coverage in Texas, an applicant must meet both medical and financial requirements:

• Medical need: You must require a nursing-facility level of care, as determined by a medical assessment.
• Income limit: Texas uses an income cap. If your monthly income exceeds the limit (currently around $2,829), you'll need a Qualified Income Trust (also called a Miller Trust) to become eligible.
• Asset limit: A single applicant can have no more than $2,000 in countable assets. Certain assets are exempt, including your primary home (up to a set equity value), one vehicle, personal belongings, and prepaid burial plans.

For married couples, the rules are more generous for the spouse who stays at home. The community spouse can keep a portion of the couple's combined assets—called the Community Spouse Resource Allowance—plus a monthly income allowance.

The Look-Back Period

This is the part that catches most families off guard. When you apply for Medicaid in Texas, the state reviews all financial transactions from the previous five years. This is called the look-back period.

If you gave away assets, transferred property to family members, or sold things below fair market value during that window, Medicaid will impose a penalty period—a stretch of time during which you won't receive benefits, even if you otherwise qualify.

The penalty is calculated based on the total value of the transfers divided by the average monthly cost of nursing home care. A $100,000 gift could result in a penalty of ten months or more.

This is why timing matters so much in Medicaid planning. The earlier you start, the more options are available.

Legal Strategies That Work

There are several well-established approaches to Medicaid planning in Texas:

• Irrevocable Medicaid trusts. Assets placed in a properly structured irrevocable trust more than five years before your Medicaid application are no longer counted as your resources. You give up control of the assets, but they're protected for your family.
• Spousal transfers. Texas allows unlimited transfers between spouses. In some situations, transferring assets to the community spouse can protect them from being counted toward the Medicaid applicant's limit.
• Annuities. A Medicaid-compliant annuity converts a lump sum of countable assets into an income stream for the community spouse. The annuity must meet specific federal requirements—it must be irrevocable, non-transferable, actuarially sound, and name the state of Texas as a remainder beneficiary.
• Exempt asset purchases. Paying down your mortgage, making home improvements, buying a new vehicle, or prepaying funeral and burial expenses can reduce countable assets while improving your quality of life.
• Caregiver agreements. If a family member has been providing care, a formal caregiver agreement can compensate them for their services—converting countable assets into a legitimate expense.

Medicaid Planning Is Not Fraud

Some families hesitate because they worry these strategies are somehow dishonest. They aren't. Medicaid planning uses legal tools that are recognized by federal and state law. The Texas Human Resources Code and federal Medicaid statutes specifically allow for trusts, annuities, and exempt assets.

The key difference between planning and fraud is transparency. Fraud involves hiding assets or lying on your application. Planning involves restructuring your finances—openly and legally—so you can qualify for benefits you need.

Every strategy must be properly documented and disclosed. That's why working with an experienced attorney is essential.

When Should You Start Planning?

The ideal time to begin Medicaid planning is five or more years before you expect to need long-term care. This gives you the most flexibility, especially for trust-based strategies that must survive the look-back period.

But even if a health crisis is already underway, there are still options. Crisis Medicaid planning can sometimes protect a significant portion of assets even at the last minute—though the options are more limited and the timeline is tighter.

If your spouse or parent is entering a nursing home soon, don't assume it's too late. Talk to an attorney before spending down assets unnecessarily.

Protecting What You've Built

You worked your entire life to build financial security for your family. Medicaid planning isn't about gaming the system—it's about making sure a health crisis doesn't wipe out everything you've saved. The rules are complicated, but the right plan can make all the difference.

Contact Dickey Law Group today to schedule a consultation. We serve families throughout The Woodlands, Spring, Conroe, and the Houston metro area. Call (832) 521-4414.