When people find out that Medicare won’t cover nursing home care but Medicaid will, a question comes to mind: Can you give assets to your family to qualify for nursing home Medicaid?
The answer is yes, you can transfer assets to your family before applying for nursing home Medicaid, but the timing and the method determine whether it helps you or hurts you.
Texas Medicaid has rules specifically designed to catch last-minute transfers, and the consequences of getting this wrong are serious. Understanding how those rules work, and what legitimate planning looks like, is the starting point for protecting what you have built.
Texas Medicaid Requirements
To qualify for nursing home Medicaid in Texas, a single applicant must have no more than $2,000 in countable assets. Monthly income cannot exceed $2,982. These thresholds are set by the Texas Health and Human Services Commission and are effective as of January 1, 2026.
For married couples, federal law provides some protection. The spouse remaining at home may keep up to $162,660 under the Community Spouse Resource Allowance. That protection exists to prevent one spouse’s nursing home admission from wiping out the other’s financial footing entirely.
Most middle-class Texas families are well above these limits. Reaching eligibility requires a deliberate plan, and how you get there matters as much as whether you get there.
The Look-Back Period
Texas Medicaid does not evaluate only your finances on the day you apply. The Texas Health and Human Services Commission reviews every asset transfer you made during the 60 months before your application date.
That is a five-year window, and it covers gifts, transfers below fair market value, and any other movement of assets out of your name.
Transfers made within that window for less than fair market value generate a penalty period. During a penalty period, Medicaid will not pay for your nursing home care even if you otherwise qualify.
The penalty is calculated by dividing the total value of disqualifying transfers by the state’s average daily private-pay nursing home rate. For example, a transfer of $90,000 within the look-back window could produce a penalty period of about a year.
The penalty does not begin until you are already in a facility and otherwise eligible, which is exactly when your family can least afford a coverage gap.
Gift Tax Exemption Is Irrelevant
Many families assume that staying within the federal gift tax annual exclusion protects them from Medicaid scrutiny. It does not. The IRS and Medicaid operate under completely separate bodies of law.
The federal gift tax exclusion is $19,000 per recipient in 2026. Staying under that amount means you do not need to file a gift tax return. Texas HHSC does not care about that threshold at all.
Every dollar transferred within the five-year look-back window is subject to review, regardless of the amount or whether any tax filing was required.
Families who gave $19,000 per year to two children for four years have made $152,000 in transfers that are fully exposed to penalty calculation.
The Medicaid Asset Protection Trust
The right planning tool for this situation is a Medicaid asset protection trust. You work with an elder law attorney to create the trust, then transfer assets into it. Once assets are inside the trust, you are no longer the owner of record for Medicaid purposes.
The clock starts on the day assets go in. After five years, those assets are outside the look-back window entirely. When you apply for nursing home Medicaid, they are not counted against you.
Your family can still benefit from the assets in the trust. You have not simply handed money away with no protection. The trust holds the assets and can be structured to provide for your loved ones after you are gone.
The Income-Only Trust: Benefits and a Key Drawback
One common version of the Medicaid asset protection trust is the income-only trust. With this structure, you transfer assets into the trust but retain the right to receive income generated by those assets during your lifetime.
Interest, dividends, and rental income can still come to you. The principal is protected from Medicaid’s asset count.
The benefit is that you do not give up your income stream. For someone living on investment returns, that can make the trust workable in a way that a full transfer might not be. The five-year clock still runs, and the principal is still protected once that period passes.
But the drawback is estate recovery. Because you retained an income interest in the trust, Medicaid may have a claim against the trust assets after your death to recover what it paid for your care.
Texas operates an estate recovery program, and an income-only trust can be subject to it. Your heirs may receive less than you intended if Medicaid files a recovery claim against the trust.
An elder law attorney can walk you through whether the income-only structure or a full transfer trust serves your situation better. The answer depends on your income needs, your asset mix, and how much time you have before a care need is likely.
Timing Is Everything
The five-year look-back is not a technicality. It is the central fact around which all of this planning revolves. Someone who establishes a trust at 67 while they are healthy has options that simply do not exist for someone who calls an attorney from a hospital waiting room at 78.
Private-pay nursing home care in the Tarrant County area runs $7,000 to $9,000 per month or more. A penalty period of twelve months means $84,000 to $108,000 in out-of-pocket costs. That is money a properly structured and properly timed trust could have protected.
The families who navigate this well are not the ones who acted in a crisis. They are the ones who sat down with an elder law attorney years earlier, understood what was at stake, and put a plan in place while there was still time for it to work.
We Are Here to Help!
If you take the right steps at the right time, you can preserve your lifestyle as you brace yourself for potential long-term care costs. To get started, call our Ft. Worth, TX estate planning office at 817-899-3286 or send us a message through our contact form.
- When Estate Planning Documents Say One Thing—and Mean Another - August 12, 2026
- Will My Estate Be Subject to Estate Taxes? - August 5, 2026
- Celebrity Estate Planning: Tony Hsieh’s Estate Is Back in the News - July 29, 2026