Can You Protect Your Assets From Medicaid?

Medicaid was the main payer for long-term care across the country, according to the official Medicaid website. In fiscal 2020, total federal and state spending hit $597.6 billion, with more than 30% of that going to long-term care services. By 2025, the Kaiser Family Foundation (KFF) reported that federal rules required states to set Medicaid home equity limits between $730,000 and $1,097,000 for applicants needing long-term care. That shows eligibility wasn't just about income, but financial assets as well. With high stakes at play, asset protection planning became essential as lots of boomers won't be able to afford some essential healthcare in years to come.

So, can assets be protected from Medicaid? Yes, within strict guardrails. States administer eligibility and safeguards within federal rules. That means compliant planning has to match standards where you live. The program also built in recovery mechanisms. For example, states must seek estate recovery for certain long-term care services after age 55. But recovery can't happen if a surviving spouse, a child under 21, or a blind or disabled child remains. Exceptions and timing are key. Asset protection comes down to what Medicaid exempts, counts, and hits hard.

Exempt assets decide who gets approved fast and who gets denied. According to the Social Security Administration, Supplemental Security Income recipients can exclude one vehicle for transportation, no matter what it's worth. That matters, given the substantial costs of living many retirees face. The Social Security Administration also lets people exclude up to $1,500 in burial funds per person and recognizes certain irrevocable burial contracts, while household goods and clothing get the same break.

Countable assets are a different story. Checking accounts and investments become resources once you hold them past the month you get them. Routine bank balances and brokerage accounts count unless a specific exclusion says otherwise. Cash on hand causes the most trouble. Sure, cash might be one of the easiest assets to transfer to heirs, but Medicaid counts every dollar – along with brokerage assets and non-homestead real estate — unless the owner converts it to exempt forms or spends it on state-approved needs.

Transfers also carry serious consequences. When assets get gifted or sold below market value, federal law at 42 U.S.C. § 1396p kicks in with a 60-month look-back. It imposes penalties equal to uncompensated transfers divided by the state's average nursing facility private-pay rate. In 2025, a community spouse can keep resources between $31,584 and $157,920 and income between $2,643.75 and $3,948 monthly, depending on the state. Adding an adult child to accounts during the look-back period also risks denial.

Strategic planning focuses on tools that move wealth around without triggering disqualification. An irrevocable Medicaid Asset Protection Trust pulls assets out of eligibility calculations when funded at least five years before an application, matching the standard look-back window in most states. The person setting it up has to give control to a third-party trustee — often an adult child. Trustmakers themselves cannot serve as a trustee or be the only beneficiary. These trusts keep income from trust property while shielding the principal from asset limits and estate recovery, though Medicaid Planning Assistance recommends against this structure for estates worth less than $100,000 due to how expensive setting them up can be. Alternatively, you could set up a joint bank account with a would-be beneficiary, just make sure the account is set up in a way that doesn't violate Medicaid's look-back period. 

For homes, five states — Florida, Michigan, Texas, Vermont, and West Virginia – recognize Lady Bird deeds, which make homes ineligible for asset recovery by allowing the owner full control during life and transferring ownership automatically at death outside probate. Knowing the best assets to inherit helps families pick efficient estate planning tools. Life estates and transfer-on-death deeds have similar probate-avoidance benefits, but some states could still go after non-probate property under their recovery rules.