When you hear the term “Medicaid planning,” you may be a bit confused because it is a program for low-income people. It’s a safety net for those who need it, but it’s not something to aspire to, right?
That make sense until you understand a few facts about Medicare and long-term care, and we will share that information here.
Medicare Coverage
You obtain Medicare coverage by earning retirement credits when you are working and paying taxes. The maximum accrual is four credits per year, and all full-time workers and most part-time workers accumulate four credits every year.
If you have 40 credits, you will be eligible when you reached the eligibility age, which is 65 right now. Even if you don’t have the 40 credits, it is possible to qualify for Medicare on your spouse’s work record.
Medicare covers most of your expenses that are categorized as medical, but it does not cover custodial care. This is the type of care that you would receive in a nursing home, and there are in-home caregivers that provide custodial care.
What Are the Odds?
When you have always been independent, it’s hard to envision a dependent dynamic. This is understandable, but the statistics don’t lie. According to the Department of Health and Human Services, 70 percent of seniors will need living assistance.
Some people get help from family members without incurring any costs, but others are not so fortunate. More than half of senior citizens will incur long-term care expenses, and over 30 percent will spend time in nursing homes.
The average length of stay is one year, but 13 percent of individuals that receive paid long-term care need assistance for more than five years.
Long-Term Care Costs
General Financial markets financial products for senior citizens, so they monitor this demographic. The company has been keeping a finger on the pulse of long-term care costs across the United States for a number of years.
We practice in Fort Worth, Texas, and according to their research, the median charge for a private room in a nursing home in our area in 2024 has been $88,724. They project that the figure will increase to almost $120,000 ten years from now.
That’s a lot of money to come up with late in your life. And if you’re married, the expenses can be doubled, so this is something to take very seriously.
Medicaid Planning
Now that we have set the stage appropriately, we can dive into the subject of this post. Medicaid will pay for long-term custodial care if you can gain eligibility, and this is why people try to qualify.
Countable Assets
The Medicaid asset limit is $2,000, but everything that you own is not considered to be countable. One motor vehicle, wedding and engagement rings and heirloom jewelry, household items, and personal effects are not counted.
You can retain unlimited term life insurance and up to $1,500 worth of whole life insurance. Medicaid will also allow $1,500 in cash set aside for final expenses.
Home Ownership
Your home is not a countable asset for Medicaid eligibility purposes with a $713,000 equity limit in 2024. However, there is no equity limit if a healthy spouse is living in the home.
This $713,000 figure and the allowance figures that we will share are going to increase for 2025 to account for inflation.
The fact that your home is not countable is the good news, but here’s the bad news: there is a Medicaid estate recovery process. Medicaid can place a lien on the property if you are a homeowner at the time of your death unless your spouse is living in the home.
Spousal Allowances
If you apply for Medicaid as a married person, your spouse would be entitled to certain allowances. One of them is the Community Spouse Resource Allowance. This is half of your assets as a couple up to a particular limit.
The maximum allowance in 2024 has been $151,140 in Texas. There is also a minimum allowance of $30,828. This is the least that a healthy spouse can retain, even if it is more than half of the total assets.
Income that is brought in by the institutionalized spouse must go toward the cost of the care. But in many cases, a healthy spouse will be relying on the income to maintain a minimal standard of living. In these situations, the healthy spouse may qualify for a Monthly Maintenance Needs Allowance.
This allows them to continue to receive the income, but once again, there is a limit. In 2024, that limit is $3,853.50 a month.
Irrevocable Income-Only Medicaid Trust
To develop a financial profile that will lead to future eligibility, you can consider a Medicaid trust. This would be an irrevocable trust, so you would surrender access to the principal when you fund the trust.
Until you apply for Medicaid, you can continue to receive income that is generated by the assets in the trust. Since many people have no intention of spending the nest egg that is providing ongoing income, this may not be life-changing at all.
You can also convey your home into the trust to protect it from Medicaid estate recovery. As long as you fund the trust at least five years before you apply, the assets in the trust would not count.
Advance planning is the key to the successful execution of the strategy. If you take the right steps in advance, you can go forward with the knowledge that your legacy is protected.
We Are Here to Help!
Our doors are open if you would like to work with a Fort Worth, TX elder law attorney to develop a plan for aging. You can send us a message to request a consultation appointment, and we can be reached by phone at 817-899-3286.
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