Elder Law: Medicaid Planning & Long-Term Care in Texas

Medicaid planning is a crucial area of elder law that helps seniors and their families navigate the complexities of paying for nursing home care, home health care, and assisted living while protecting their assets. Medicaid is a means-tested government program that, unlike Medicare, can cover the full cost of nursing home care and some in-home care services. Because Medicaid has strict income and asset limits, proper planning is essential to ensure eligibility while preserving assets for the spouse or heirs.

To qualify for long-term care Medicaid in Texas, an applicant must meet certain financial and medical requirements. As of 2024, the income limit is $2,829/month for an individual (higher if there is a spouse), and the asset limit is $2,000 for an individual and $148,620 for a non-applicant spouse. Exempt assets generally include the primary home (if equity is under $713,000 and the applicant intends to return home or has a spouse living there), one vehicle, personal belongings and household items, and certain burial funds and life insurance policies with minimal cash value. Medically, the applicant must require nursing-home-level care — needing assistance with daily activities such as bathing, dressing, and eating — confirmed by a doctor’s assessment.

Since many seniors exceed Medicaid’s financial limits, strategic planning helps them qualify while preserving assets. Asset protection trusts move assets into an irrevocable trust (done at least five years before applying, to avoid Medicaid’s look-back penalty), allowing the individual to retain income while keeping those assets from being counted. Miller Trusts (Qualified Income Trusts) redirect excess income into a trust that pays for care, so an applicant can qualify despite exceeding income limits. Spousal protections (the Community Spouse Resource Allowance) let a healthy spouse keep part of the couple’s income and assets, preventing impoverishment. And because Medicaid has a five-year look-back period — where large gifts or transfers can create a penalty period — strategic gifting and spending on exempt items (such as home improvements or prepaid funerals) can help reduce countable assets.

Once eligible, Medicaid can help pay for nursing home care (room, board, and medical services), Home & Community-Based Services (HCBS) waivers that allow seniors to receive in-home care instead of moving to a nursing home, and assisted living — where Texas Medicaid does not pay room and board but may cover medical services provided there. After a Medicaid recipient passes away, Texas may try to recover the cost of care through the Medicaid Estate Recovery Program (MERP); proper planning, such as a Lady Bird (enhanced life estate) deed, can protect the family home from recovery claims.