Everyone has heard of Medicaid, but few truly understand what it means to approach this topic with clarity and foresight. Medicaid planning isn’t just a legal or financial concern—it’s a crucial step in ensuring access to quality long-term care while preserving the heritage you’ve worked hard to build.
Being proactive can make all the difference: the earlier you plan, the more options you’ll have to protect your assets and avoid financial hardship down the road. For Texans in particular, understanding how state-specific Medicaid rules work is essential.
This article provides the core strategies every Texas resident should know in order to approach Medicaid eligibility with confidence and structure—whether you’re planning for yourself, a spouse, or an aging parent.
Medicaid eligibility rules in Texas
1. Understand the 5-Year Look-Back Rule and Transfer Penalties
The Texas Health and Human Services (HHS) enforces a “five-year look-back period” for all Medicaid applications related to long-term care. This means the agency will review any asset transfers made within 60 months of the application date to determine if they were made below market value or as gifts.
If such transactions are found, they could result in a penalty period, during which the applicant will be ineligible for Medicaid, and will have to pay out of pocket for care —even if they meet all financial qualifications.
Tip: Don’t wait for a health crisis to begin Medicaid planning. Establishing a strategy at least five years in advance helps avoid costly penalties and ensures access when care is needed most.
2. Use a Medicaid-Compliant Irrevocable Trust to Protect Assets
A Medicaid Asset Protection Trust (MAPT) allows individuals to legally remove assets from their estate while still potentially benefiting from them indirectly. When structured properly, assets in this type of irrevocable trust are no longer considered countable for Medicaid eligibility purposes.
However, these trusts must be:
- Created at least five years before applying, to avoid a penalty for transfer of assets,
- Structured in accordance with Texas regulations, as outlined in the Texas Administrative Code,
- Managed by a third-party trustee, not the person seeking Medicaid.
Tip: Revocable trusts do not offer this protection, as the grantor retains control over the assets, making them countable for Medicaid purposes.
3. Protect the Primary Residence and Avoid MERP (Medicaid Estate Recovery Program)
Texas Medicaid treats the primary home as a non-countable asset, as long as the applicant intends to return home or has a spouse, minor, or disabled child living in it. As of 2025, the home equity limit is $730,000.
But that’s not the end of the story. After the Medicaid recipient passes away, the state may seek repayment for benefits paid, through the Medicaid Estate Recovery Program (MERP).
Tip: Certain transfers are exempt from penalties and can prevent MERP claims—for example, transferring the home to a caregiver child, a disabled child, or using a Lady Bird Deed, which allows the home to pass directly to a beneficiary without going through probate.
4. Execute a Strategic and Documented Spend Down
To qualify for Medicaid in Texas, individuals must have no more than $2,000 in countable assets (Texas Benefits eligibility guide). A “spend down” refers to the process of reducing excess assets in a way that complies with Medicaid rules. But it’s important to know what counts as a spend down and when the transactions should take place.
Examples of legitimate spend-down expenses include:
- Paying off medical or credit card debt,
- Making home improvements for safety or accessibility,
- Purchasing a reliable vehicle for the spouse,
- Prepaying burial or funeral arrangements.
Warning: if you spend money on these things before the Medicaid “Snapshot Date” is established, then they won’t “count” toward a spend down for eligibility purposes, and you’ll need to start the spend down all over! Don’t risk months of ineligibility – months you’ll have to pay for care out of pocket. Get the right advice to make sure you have a soundly planned, and correctly timed spend down strategy.
Tip: Always maintain clear documentation for spend-down expenses, and ensure all purchases are made at fair market value (not essentially gifts to others) to avoid penalties.
5. Protect the Community Spouse’s Resources and Income
When only one spouse needs long-term care, Medicaid rules allow the community spouse (the healthy spouse) to retain a portion of the couple’s assets. In 2025, the default is up to $157,920.
TIP: There’s some allowance in the rules to allow a community spouse with income under a certain threshold, to keep MORE of the couples’ assets. You’ll need the help of a Medicaid planning expert to navigate those rules, but this technique can result in the community spouse being able to keep ALL of the assets, and still obtain benefits for the one needing care.
How to plan ahead for Medicaid eligibility
These criteria are some of the biggest roadblocks people experience in Medicaid qualification. The lookback period is especially difficult because nobody can plan exactly when those needs will arrive.
Every day, we help families navigate the legal, financial, and medical complexities of Medicaid planning with precision and compassion. Whether you’re trying to protect your home, prepare for the cost of a nursing home, or create a long-term strategy for a loved one, we offer more than legal documents—we offer clarity, proven strategies, and peace of mind.
With us, you can:
- Understand how Medicaid rules apply to your unique situation
- Structure your estate to protect your home and savings
- Create trusts and deeds that prevent future complications
- Reduce the risk of a Medicaid Estate Recovery claim against the estate of the one needing care
- Preserve dignity and autonomy—for yourself and your family
You don’t need to wait for a crisis. But even if you’re already in a crisis, it’s almost always the case that there are still strategies available that we can use to protect the majority of your savings and get the benefits you need. Now is the time to act.
We’re here to help you protect what matters most—with clarity, expertise, and a plan built around your values.
