Medicaid Asset Protection for Long-Term Care: What You Need to Know

Medicaid is a joint federal and state program that funds long-term care services for individuals who meet income and asset eligibility requirements. Unlike Medicare — which covers only short-term skilled nursing care — Medicaid covers extended nursing facility stays and home- and community-based care through waiver programs.

The Five-Year Look-Back Rule

When an applicant applies for Medicaid long-term care benefits, the state reviews all financial records for the 60 months (five years) immediately preceding the application date. This look-back was established by the Deficit Reduction Act of 2005.

If a disqualifying transfer — an asset given away for less than fair market value — is found, the state imposes a penalty period: Medicaid ineligibility calculated by dividing the transferred value by the average monthly private-pay cost of nursing home care in that state. There is no statutory maximum on penalty period length.

The look-back clock begins on the application date, not the date of the transfer. A gift made four years ago may still trigger a penalty if you apply today.

What Counts as a Countable Asset

Countable assets include: checking and savings accounts, CDs, stocks and investment accounts, additional real estate beyond the primary home, most retirement accounts (varies by state), and extra vehicles.

What Is Exempt

Federal Medicaid guidelines recognize several exempt assets:

Primary home. Exempt if the applicant lives there, states intent to return, or a qualifying person — a spouse, minor child, or disabled child — lives in it. States may impose an equity value limit.

One motor vehicle. Most states exempt one automobile.

Personal property and household goods. Clothing, furniture, and everyday personal effects.

Prepaid funeral arrangements. Irrevocable prepaid funeral contracts within state-defined limits.

Spousal Protections: The Community Spouse Resource Allowance

Federal law protects the community spouse — the partner who remains at home. The Community Spouse Resource Allowance (CSRA) defines how much the community spouse may retain of the couple's combined countable assets.

Per the CMCS Informational Bulletin released November 15, 2024, for the 2025 benefit year:

• §Federal minimum CSRA: $31,584
• §Federal maximum CSRA: $157,920

Each state sets its own CSRA within these federal bounds. The community spouse also retains income protections through the Minimum Monthly Maintenance Needs Allowance (MMMNA).

Medicaid Estate Recovery

States are required to seek recovery from the estates of Medicaid beneficiaries who were age 55 or older when receiving long-term care benefits, per the Omnibus Budget Reconciliation Act of 1993 (OBRA '93).

Recovery is typically delayed while a surviving spouse, minor child, or disabled child is living. Once those protections no longer apply, the state may file a claim against the beneficiary's estate — most commonly the primary home.

Some states use an expanded definition of estate that includes assets passing outside of probate.

Where to Get Official Information

CMS's Medicaid.gov provides the federal framework and current resource standards. Each state's Medicaid agency publishes the specific rules that apply in that state.

Educational purposes only. Not financial, tax, or legal advice.