Linda Nguyen sat in a conference room at the Plano skilled nursing facility on a Tuesday afternoon, doing arithmetic on her phone.
Her husband James, 77, had been admitted three days earlier following a massive hemorrhagic stroke that his neurologist described as "catastrophic but survivable." He could not speak. He could not walk. He required 24-hour skilled nursing care that no home-care arrangement could safely provide. Linda, 74, had toured three facilities in Collin County over the weekend, each one recommended by the discharge social worker at Baylor Plano. This one — the closest to their home in West Plano, the one with the warmest staff and the least institutional smell — cost $9,400 a month.
James had retired from Texas Instruments after 32 years. They had done what financial planners told them to do: maxed their 401(k), paid off the house, maintained a joint savings and investment account. When she sat down with that number — $9,400 — and their account balance — $391,000 — the math was simple and terrifying: they had money for about three and a half years. After that, they would have almost nothing left. James would be penniless, the house would have to be sold to continue paying for his care, and Linda would be watching her husband's care funded by whatever she could earn from liquidating a home they had lived in for 27 years.
She typed "Texas Medicaid nursing home planning" into her phone.
What Linda was about to discover — what most families in her situation never learn until they have already made expensive, irreversible mistakes — is that even at the moment of nursing home admission, Texas families have more legal options than they realize. The five-year Medicaid look-back period is real. But it is widely misunderstood in ways that cause families to either panic-sell assets they didn't need to sell, or gift assets away in patterns that create Medicaid penalties instead of preventing them.
The Misconception That Costs Texas Families Millions
The most dangerous myth in Medicaid crisis planning is this: "The five-year look-back means we have to wait five years to apply."
It does not. The five-year look-back period, established under 42 U.S.C. § 1396p and implemented through Texas Medicaid rules, looks backward — it examines 60 months of prior financial history at the time of the Medicaid application to determine whether the applicant transferred assets for less than fair market value. If they did, a penalty period of ineligibility is imposed.
What the look-back does not do is prevent a family from applying for Medicaid today, protecting assets using legitimate legal tools, or beginning a structured plan that positions the applicant for eventual eligibility. The question is not "how long do we have to wait?" The question is "what can we do between now and the day of eligibility that protects the most assets within the law?"
The second most dangerous myth: "We have to spend everything down to $2,000 before Medicaid will help."
This is partially true for a single applicant. For a married couple — and most nursing home crises involve a married couple — the rules are dramatically more generous and dramatically more complex. Understanding those rules is where Texas elder law attorneys earn their fees many times over.
The Home Is Almost Always Exempt
When a married person is admitted to a nursing home and applies for Texas Medicaid — formally, the STAR+PLUS nursing facility program — the primary residence is exempt from the Medicaid asset calculation as long as the community spouse (the spouse who remains at home) continues to live there.
This means the Nguyens' house, fully paid off and valued at approximately $520,000, is not a countable asset for Medicaid eligibility purposes. Linda does not have to sell it. She does not have to move out. She does not have to put it in a trust or transfer it to her children. The house is simply off the table — completely — for as long as she lives in it.
The same exemption applies to one automobile of any value. A pre-paid funeral and burial arrangement for the applicant (and in Texas, often the community spouse as well) is also exempt, up to the amounts permitted under Texas Medicaid rules. Personal property, household furnishings, and IRAs belonging to the community spouse are generally treated differently from countable assets and may have special protections.
For many North Texas families who came to elder law planning too late — but not too late to matter — the fact that the house is safe is the single most important thing they didn't know.
The Community Spouse Resource Allowance
In addition to the home, federal law under the Spousal Impoverishment provisions of the Medicare Catastrophic Coverage Act (42 U.S.C. § 1396r-5) protects a portion of the couple's countable assets for the community spouse.
This protection is called the Community Spouse Resource Allowance, or CSRA. In 2025, the CSRA in Texas allows the community spouse to retain approximately $157,400 in countable assets, adjusted annually for inflation. (A "countable asset" is one that Medicaid considers available to pay for care — it excludes the home, one car, and certain other items.)
The way the CSRA works: at the time of the Medicaid application (or sometimes at the time of nursing home admission, in what is called a "snapshot"), the couple's combined countable assets are totaled. The community spouse retains one-half of those assets, up to the CSRA maximum. The nursing home spouse must spend down to a very low asset limit — typically $2,000 — from their share.
For the Nguyens, the arithmetic looked different once a Texas elder law attorney applied these rules. The $391,000 in countable savings was divided: Linda was entitled to retain approximately $157,400 as the CSRA. James would need to spend down his share — roughly $234,000 — to $2,000 before qualifying for Medicaid nursing home coverage. That is a significant spend-down requirement, but it is not "spend everything."
And the law provides additional tools for managing that spend-down.
Legal Ways to Spend Down Countable Assets
The Medicaid rules that govern what happens to assets before the application require careful navigation. The wrong move — transferring assets to a child without consideration, for example — triggers a look-back penalty. The right moves can dramatically change what happens to the family's financial position.
Home improvements and repairs. Spending on the primary residence — which is exempt — is a legitimate and often overlooked strategy. Linda could use a portion of the spend-down assets to make deferred repairs to their home, upgrade essential systems, or make it more comfortable for her own long-term use. These expenditures reduce the countable estate while improving an exempt asset.
Prepaid funeral and burial arrangements. Texas Medicaid permits pre-payment of funeral and burial contracts as an exempt expenditure for both the applicant and the community spouse. A properly structured irrevocable prepaid funeral contract is removed from the countable asset calculation.
A new vehicle. One automobile of any value is exempt. For families where the community spouse drives an older vehicle, replacing it with a newer one converts a countable asset into an exempt one while serving the community spouse's practical needs.
Payment of legitimate debts. Paying off a mortgage, credit card debt, home equity line, or other legitimate obligation is not a transfer for less than fair market value — it is a dollar-for-dollar reduction of debt. If Linda had an outstanding mortgage or home equity line, using joint savings to pay it off would reduce the countable asset balance while eliminating a liability.
None of these strategies is unlimited. Each requires specific facts and proper execution. But together, they can meaningfully reduce the assets that must be spent before Medicaid eligibility is established.
The Medicaid-Compliant Annuity
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For assets that cannot be converted to exempt categories through home improvements, prepaid expenses, or debt payoff, Texas families in crisis situations often have one additional tool: the Medicaid-compliant annuity.
An annuity, properly structured to comply with the requirements established in the Deficit Reduction Act of 2006, converts a lump-sum asset into an income stream for the community spouse. Because the annuity converts a countable asset (the lump sum) into income for the community spouse, the countable asset no longer exists at the time of the Medicaid application — and the income stream to the community spouse is protected by a separate provision of federal Medicaid law called the Minimum Monthly Maintenance Needs Allowance, or MMMNA.
The MMMNA ensures that a community spouse retains enough of the couple's combined income to meet basic living expenses — in 2025, the minimum is approximately $2,555 per month, with the maximum reaching $3,948 per month depending on housing costs. If the community spouse's own income is below this floor, they are entitled to receive a portion of the nursing home spouse's income before Medicaid claims it — a mechanism called the "spousal income allowance."
The annuity strategy is not appropriate for every family and not every annuity product qualifies. A Medicaid-compliant annuity must name the State of Texas as the primary beneficiary (up to the amount of Medicaid benefits paid on the applicant's behalf), be actuarially sound, and be non-assignable and non-transferable. These requirements are specific and the implementation is technical — a misstep can produce a look-back penalty rather than a legitimate spend-down. This is one of the primary reasons an elder law attorney's involvement early in a crisis matters.
The Income Problem: When Social Security and Pension Push You Over the Cap
Texas Medicaid for nursing home care is an income-cap program. In 2025, the income limit for nursing facility Medicaid is approximately $2,901 per month (300 percent of the SSI Federal Benefit Rate). An applicant whose total gross income — Social Security, pension, retirement account distributions — exceeds this cap cannot qualify for Medicaid through the standard pathway, no matter how little they have in assets.
James Nguyen's monthly income from Social Security plus his Texas Instruments pension totaled approximately $3,200. That is $299 per month over the income cap. Without additional planning, he would be income-ineligible for Medicaid regardless of his asset level.
The solution in Texas is a Qualified Income Trust — commonly called a Miller Trust, after the 1992 Tenth Circuit case that first addressed this structure. Under 42 U.S.C. § 1396p(d)(4)(B), a Miller Trust is an irrevocable trust into which the applicant deposits their monthly income above the Medicaid cap. Funds in the trust are used to pay: the nursing home's patient pay amount, any allowances to the community spouse, certain medical expenses, and the trust's administrative costs. Remaining funds pass to the state upon the beneficiary's death as reimbursement for Medicaid benefits paid.
A Miller Trust does not protect income — it redirects it in a way that satisfies Medicaid's income-cap rule while allowing the applicant to qualify. But it is a required step for Texas Medicaid applicants whose monthly income exceeds $2,901, and setting it up correctly — with the right trustee, the right account structure, and the right monthly administration — requires legal guidance. A Miller Trust established incorrectly can result in continued ineligibility or unexpected Medicaid estate recovery claims. For the full explanation of how Miller Trusts work in Texas, see our guide to Qualified Income Trusts in Texas.
What You Cannot Do — and Why It Matters Now
The look-back period exists precisely because Medicaid planners and elder law attorneys have been navigating these rules for decades. Texas Medicaid (HHSC) has seen every pattern of asset transfer, and transfers that appear to be legitimate can trigger penalties if they do not meet specific legal standards.
The most common mistake families make in the first 72 hours after a nursing home admission: they transfer assets to adult children. A wire transfer to a son in Frisco, a quit-claim deed to a daughter in Allen, a large "gift" that the family assumes is covered by the annual gift tax exclusion — each of these, if made within 60 months of the Medicaid application, is presumed to be a transfer for less than fair market value and generates a penalty period of ineligibility.
The penalty is calculated by dividing the transferred amount by the average monthly cost of nursing home care in Texas (approximately $7,600 in 2024 HHSC tables). A transfer of $76,000 generates a ten-month penalty period. During that penalty period, Medicaid will not pay for nursing home care — and the family must cover costs out of pocket, even if the transferred assets are gone.
The gift tax annual exclusion ($18,000 per recipient per year in 2025) has no bearing on Medicaid. It is an income tax concept. Medicaid applies its own rules, which treat any transfer for less than fair market value within the look-back window as presumptively improper.
What Happened to the Nguyens
Linda called a Texas elder law attorney within the week. The analysis took several appointments and a thorough review of their financial picture. The result was a plan that combined several tools: using a portion of the joint savings to prepay funeral contracts and make overdue home improvements; purchasing a Medicaid-compliant annuity to convert a portion of the remaining countable assets into protected income for Linda; establishing a Miller Trust to bring James under the income cap; and structuring the Medicaid application to claim the maximum CSRA.
James qualified for Medicaid nursing home coverage approximately nine months after his admission, having spent down his share of countable assets through the approved strategies. Linda retained the house, the CSRA amount, and enough monthly income — bolstered by the annuity payments and the spousal income allowance — to live in the home they had shared for 27 years.
It was not the outcome she had imagined when she sat in that conference room doing arithmetic on a Tuesday afternoon. But it was substantially better than the outcome she had feared — and entirely legal.
The Window Is Still Open — But Not Forever
Medicaid crisis planning is time-sensitive in one direction: the more assets that are spent on nursing home costs before an attorney is involved, the fewer options remain. Every month that passes without a structured plan is a month of nursing home cost paid out of pocket that could, with proper planning, have been funded by Medicaid. A family that engages an elder law attorney within the first two or three weeks of a nursing home admission has the full toolkit available. A family that waits a year often does not.
The good news for North Texas families is that the planning window does not close at admission. It does not even close in the first few months. But it narrows — and the assets that could have been preserved through legal strategies continue to be spent on care that Medicaid might otherwise cover.
At WG Law, Taylor Willingham has guided more than 10,000 Texas clients and their families through exactly this kind of planning. Taylor has authored five books on estate planning and elder law and has worked with North Texas families across every stage of the long-term care spectrum — from advance planning while there is still time to crisis Medicaid planning in the week after a nursing home admission. For further reading, see our guides on the Texas Medicaid five-year look-back period, spousal impoverishment and the CSRA, and Medicaid Asset Protection Trusts. To learn more about WG Law's elder law and Medicaid planning practice, visit our elder law page.
Call 214-250-4407 or contact WG Law to speak with a Texas elder law attorney about your family's situation.
Offices in McKinney (7701 Eldorado Pkwy, Suite 200) and Southlake (1560 E Southlake Blvd, Suite 100). Serving families throughout Collin County, Dallas County, Tarrant County, Denton County, and the greater DFW metroplex.
This article is general information, not legal advice. Medicaid eligibility rules are complex and depend on specific facts, asset types, income sources, and state implementation. Contact a licensed Texas elder law attorney to evaluate your specific situation.