A Medicaid spend-down attorney works out which of a family's assets count toward a state's long-term-care Medicaid limit and which do not. The attorney also checks gifts and transfers against the look-back rules, analyzes the lawful ways to reach the limit, and prepares or reviews the application. All of this turns on the state's own rules.
A mother may have just moved from the hospital into a nursing home, or a husband's care at home may have become more than one person can manage. The monthly bill may already be arriving. You may be the adult child sorting through statements at a parent's kitchen table, or the spouse wondering what will be left to live on. The questions are concrete: whether the savings must be spent first, what happens to the house, and whether a gift made to a grandchild three years ago will cause a problem.
This page explains the federal framework that every state builds on, where states differ, and which records bear on the rules.
What a Medicaid Spend-Down Attorney Does
In everyday use, "spend down" means reducing countable assets to the level a state's Medicaid program requires before it approves long-term-care coverage. The term has a second use as well. Under the medically needy option, a person can become eligible by incurring medical expenses that reduce income above the state's standard, as CMS explains. That income version is a separate calculation from spending down assets.
Federal law, mainly 42 U.S.C. § 1396p and 42 U.S.C. § 1396r-5, sets the framework. Each state runs its own program within it, with its own asset limits and rules.
The work in a spend-down matter usually includes:
- sorting countable assets from exempt ones;
- mapping the look-back period, which federally is 60 months for transfers made on or after February 8, 2006, under 42 U.S.C. § 1396p(c)(1)(B)(i);
- analyzing which spend-down choices the rules permit;
- preparing or reviewing the Medicaid application.
When the applicant is married, the attorney looks at both the person who needs care and the community spouse. The community spouse is the spouse of the person who is in a nursing facility or other medical institution. A broader overview of what a Medicaid planning attorney does covers the other parts of this work.
How the Spend-Down Process Works Under Federal Rules
The first sorting step separates countable assets from exempt ones. A countable asset is one the state counts toward its Medicaid asset limit. An exempt asset is one the state does not count. Federal law does not set one national asset limit for the applicant. Each state sets its own limit, while 42 U.S.C. § 1396r-5 governs what the community spouse keeps.
The look-back period. The look-back period is the window before the application date during which the state reviews transfers of assets. The federal rule is 60 months for transfers made on or after February 8, 2006 (42 U.S.C. § 1396p(c)(1)(B)(i)). For someone in a nursing home, the window counts back from the first date the person is both institutionalized and has applied. How a state applies the look-back depends on its own rules.
The penalty period. A penalty period is a stretch of months during which the person is ineligible because assets were given away or sold for less than fair market value inside the look-back. The length is calculated in two steps:
- the total uncompensated value of all such transfers is divided by the average monthly private-pay cost of nursing-facility care in the state at the time of application;
- the state may not round down any fraction of a month (42 U.S.C. § 1396p(c)(1)(E)).
For transfers made on or after February 8, 2006, the penalty starts on the later of two dates: the first day of a month during or after which assets were transferred, or the date the person is eligible and would otherwise be receiving institutional-level care based on an approved application but for the penalty period, and not during another period of ineligibility (42 U.S.C. § 1396p(c)(1)(D)(ii)). Inside the federal 60-month look-back, a gift made four years ago is penalized the same way as one made last month.
Exceptions. Not every transfer is penalized. The statute's exceptions include:
- a transfer to the person's spouse, which carries no transfer penalty (42 U.S.C. § 1396p(c)(2)(B)(i));
- a home whose title is transferred to the spouse (42 U.S.C. § 1396p(c)(2)(A)(i)).
Estate recovery. Estate recovery is the state's right to seek repayment from a deceased Medicaid recipient's estate. Under 42 U.S.C. § 1396p(b)(2), recovery may be made only after the death of the surviving spouse, if any, and only at a time when there is no surviving child who is under 21 or who is blind or disabled. What a state recovers from depends on that state's rules.
Countable and Exempt Assets: What the Rules Distinguish
It is easy to assume the house is safe no matter what. For long-term-care coverage, that is not quite right. Federal law sets the outer frame for exempt assets, and each state applies its own list.
The home. Under 42 U.S.C. § 1396p(f), long-term-care Medicaid coverage is barred when home equity is above a limit, unless a spouse, a child under 21, or a blind or disabled child is lawfully residing in the home or the limit is waived for demonstrated hardship. CMS's 2026 chart, effective January 1, 2026, sets the range states choose within:
- minimum home-equity limit: $752,000;
- maximum home-equity limit: $1,130,000.
Other assets. Exempt categories beyond the home, and the exact list of what counts, depend on the state's current rules. Accounts and property not covered by an exemption are generally what an attorney examines as countable. California, for example, has its own rules on Medi-Cal asset limits.
What the community spouse keeps. Under 42 U.S.C. § 1396r-5, the community spouse keeps a share of the couple's countable assets, called the community spouse resource allowance (CSRA). The federal 2026 standards bulletin sets these figures, effective January 1, 2026:
- minimum resource standard: $32,532;
- maximum resource standard: $162,660.
The amount a particular spouse keeps depends on the couple's total resources and on the state's rules.
Permissible Spend-Down Strategies an Attorney May Analyze
What follows describes what the rules allow and what each tool depends on. It is not a recommendation of any approach. No plan guarantees eligibility, protects a particular asset, avoids a penalty or avoids estate recovery.
Paying for care and needs directly. The transfer penalty applies to assets disposed of "for less than fair market value" (42 U.S.C. § 1396p(c)(1)(A)), so spending on care or on a purchase at fair market value is not a transfer of that kind. Whether the money spent was countable, or whether what it bought is treated as exempt, depends on the state's rules.
Annuities. An annuity is a financial product that turns a lump sum into a stream of income. Federal law treats buying an annuity as a transfer for less than fair market value unless the state is named as remainder beneficiary: in the first position for at least the total amount of medical assistance paid, or in the second position after a community spouse or a minor or disabled child and in the first position if that spouse or the child's representative disposes of the remainder for less than fair market value (42 U.S.C. § 1396p(c)(1)(F)).
For the transfer rules, an annuity purchased by or on behalf of someone who has applied for long-term-care Medicaid is also treated as an asset unless it meets one of two sets of conditions in 42 U.S.C. § 1396p(c)(1)(G). Either it is an annuity described in section 408(b) or (q) of the Internal Revenue Code or was purchased with proceeds from certain retirement accounts (including IRAs, simplified employee pensions and Roth IRAs), or it is all of the following:
- irrevocable and nonassignable;
- actuarially sound;
- paid in equal amounts, with no deferral and no balloon payments.
State rules and the annuity's terms decide the rest.
Irrevocable trusts. An irrevocable trust is a trust the person who created it generally cannot undo. When a trust is funded with any of the applicant's money, CMS notes that the trust can be considered available to the applicant. Whether a particular trust shelters anything depends on its terms, its timing and the state's rules.
Spousal transfers and spousal refusal. A transfer to a spouse carries no transfer penalty, though resources held by either spouse are still considered in the eligibility determination, apart from the community spouse resource allowance (42 U.S.C. § 1396r-5(c)(2)). Spousal refusal, meaning the community spouse's formal refusal to contribute assets, is not available in every state. Whether a state allows it depends on that state's current rules.