Families protect a parent's assets from nursing-home costs by using the rules Medicaid itself sets: which assets count and which are exempt, what a spouse at home may keep, which transfers carry no penalty, and how trusts and annuities are treated. Gifts inside the look-back period can delay coverage, and each state applies these rules its own way.
Most people facing this question are adult children or a husband or wife watching someone they love move toward a nursing home, often after a fall, a hospital stay or a diagnosis that changed everything quickly. They are trying to work out whether the savings a parent built over a lifetime, and the house the family grew up in, will be gone before Medicaid steps in, and whether anything done now could make things worse.
This page explains the federal framework for Medicaid long-term-care coverage that every state builds on: what counts, what the look-back is, what a spouse keeps, which planning tools the law recognizes, and how estate recovery works after death.
What 'Protecting Assets' Actually Means Under Medicaid Law
Medicaid pays for nursing-home care only for people with limited means. Under its long-term-care rules, a person generally must reduce their countable assets, meaning the assets Medicaid adds up against its eligibility limit, down to their state's limit before the program pays. That reduction is called spend-down. Exempt assets are the ones Medicaid leaves out of that count.
Under the federal framework, common exempt assets include the primary home, one vehicle, personal belongings and prepaid burial arrangements. This is a partial list, and the exact exemptions depend on each state's current rules.
The home has a ceiling. Under 42 U.S.C. § 1396p(f), a person whose home equity exceeds the limit cannot receive long-term-care Medicaid coverage unless a spouse, a child under 21, or a blind or disabled child lawfully lives in the home. The statute also calls for a waiver in cases of demonstrated hardship. For 2026, the federal standards chart sets the home-equity limits at a minimum of $752,000 and a maximum of $1,130,000, effective January 1, 2026; each state picks its figure within that range.
"Protecting assets" means using rules the law permits. It never means concealing, understating or failing to report an asset. Federal law sets the framework, and each state runs its own program, so a state's limits and procedures (California's Medi-Cal asset limits, for example) can differ sharply from another's.
The Look-Back Period and How Transfer Penalties Work
Federal law looks backward before it pays. The look-back period is the window before a Medicaid application during which the agency reviews gifts and other transfers. Under 42 U.S.C. § 1396p(c)(1)(B)(i), for transfers made on or after February 8, 2006, the look-back date is 60 months before the person is both institutionalized and has applied. The statute reads:
"The look-back date specified in this subparagraph is a date that is 36 months (or, in the case of payments from a trust … or in the case of any other disposal of assets made on or after February 8, 2006, 60 months) before the date specified in clause (ii)."
The 36-month figure applies only to older transfers. A state's own look-back and its start date depend on that state's current rules, including in California.
A transfer for less than fair market value inside the look-back creates a penalty period: months of Medicaid ineligibility for long-term care. Under 42 U.S.C. § 1396p(c)(1)(E), the number of months equals the total uncompensated value transferred divided by the average monthly private cost of nursing-facility care in the state, and a state may not round down a fractional month.
Timing matters most here. Under 42 U.S.C. § 1396p(c)(1)(D)(ii), the penalty starts on the later of the month of the transfer and the date the person is eligible and would otherwise be receiving institutional-level care under an approved application. A gift made four years ago inside the look-back is therefore penalized the same way as one made last month.
Not every transfer is penalized. The statute lists exceptions, including a transfer of the home to the person's spouse, and under 42 U.S.C. § 1396p(c)(2)(B)(i) a transfer of assets to a spouse carries no transfer penalty. The statute lists further exceptions with their own specific conditions.
What a Spouse at Home Is Allowed to Keep
The community spouse is the husband or wife who stays at home when the other enters a nursing facility. Federal spousal-impoverishment rules in 42 U.S.C. § 1396r-5 exist so that spouse is not left with little or nothing. For a wife or husband reading this, it is often the most important section, because it sets the floor of what the law protects.
The Community Spouse Resource Allowance (CSRA) is the share of the couple's combined countable assets the community spouse may keep. According to the CMS 2026 standards chart, the federal minimum resource standard is $32,532 and the maximum is $162,660, effective January 1, 2026.
The Minimum Monthly Maintenance Needs Allowance (MMMNA) is the monthly income level to which the community spouse's own income can be raised, using part of the institutionalized spouse's income if the spouse at home has less. Under 42 U.S.C. § 1396r-5(d), the resulting community spouse monthly income allowance is deducted from the institutionalized spouse's income only to the extent that income is made available to the community spouse. The 2026 chart sets the minimum at $2,705 for all states except Alaska ($3,381.25) and Hawaii ($3,111.25), effective July 1, 2026, and the maximum at $4,066.50, effective January 1, 2026. Federally, the minimum changes each July 1, and the maximum and resource figures change each January 1.
The home is generally exempt while the community spouse lives in it, and the home-equity limit described above does not bar coverage while a spouse lives there.
Spousal refusal means a community spouse declining to contribute assets above the CSRA. It is not available in every state, and whether a state allows it depends on that state's rules. Within the federal limits, each state sets its own MMMNA, and under 42 U.S.C. § 1396r-5 the CSRA is generally the greatest of the federal minimum, a figure the state sets (up to the federal maximum) and the spousal share (half of the couple's combined resources, up to that maximum). A state's own figures apply from the dates that state's agency gives.
Planning Tools the Law Permits: Trusts, Annuities, and Spend-Down Choices
An irrevocable Medicaid asset protection trust is a trust the person creating it cannot cancel and whose principal they cannot reach. Assets placed in it more than the look-back period before an application generally are not counted, though the result depends on how the trust is written and on the state's rules. Trust payments treated as transfers fall under the 60-month look-back too.
A revocable living trust works differently. Because the person keeps control and can take the assets back, those assets generally remain countable.
An annuity converts a lump sum into an income stream. Under 42 U.S.C. § 1396p(c)(1)(G), an annuity bought by or on behalf of someone who has applied for nursing-facility or other long-term-care coverage counts as an asset for transfer purposes unless it is one of certain retirement annuities or it is irrevocable and nonassignable, actuarially sound, and pays equal amounts with no deferral and no balloon payments. Under 42 U.S.C. § 1396p(c)(1)(F), the state must also be named as remainder beneficiary in first position, or in second position after a community spouse or minor or disabled child. Meeting these terms does not mean any particular eligibility result will follow.
Spending countable assets at fair market value, or on exempt items, is not a gift. Families sometimes consider home repairs, a vehicle, prepaid funeral arrangements or paying off a mortgage; whether a particular purchase is treated that way depends on the state. A closer look at how Medicaid spend-down works is available elsewhere on this site.
Federal law also recognizes certain home transfers to family members, including a child who lived in the parent's home and provided care, under conditions the statute spells out precisely. None of these tools always protects assets, and none is a way around the look-back.