There are legal ways to protect your estate from nursing home costs and to qualify for Medicaid payment of the nursing home bill.  Knowledge and experience in this specialized area of law are required in order to know what estate planning options are appropriate for a given client or situation and to implement the plan successfully. I have been practicing in this area of law for over 30 years and have been a certified specialist in elder law since 1998. See the page describing the CELA specialty certification. The Planning Overview section of this page lists some of the possible planning options available to protect your estate.


Long-term care and custodial care are terms referring to assistance to a person for their daily living requirements such as dressing, walking, bathing, eating and taking medications. Trained medical personnel are, by definition, not required for such care.

Medicare is a federal health insurance program primarily for the elderly (age 65 and over). Medicaid is a federal and state health insurance program for specified groups of people meeting financial and other criteria for eligibility. Medicare does not pay for custodial care. Medigap and Medicare supplemental insurance and most private medical insurance also do not cover custodial care.


Another option in planning for the possibility of nursing home entry is to plan for Medicaid eligibility. With a knowledge of the complexities of the relevant law, one can usually preserve significantly more of their estate by proper planning. The following explains some of the basic law relating to Medicaid. Please realize that this area of the law is very complex and there are many nuances and exceptions that are not covered here. Legal analysis is highly dependent on the specific facts relating to each person’s circumstances.

The following abbreviations are used in this outline:

  • CS: community spouse; this is the spouse who continues to live at home
  • NHS or IS: nursing home spouse or institutionalized spouse
  • CSRA: community spouse resource allowance
  • IP: ineligibility period related to a transfer of resources

Eligibility Rules

In order to qualify for coverage one must meet requirements in the following categories:

  1. Covered group – e.g., age 65 and over
  2. Residency
  3. Citizenship
  4. Need for care
  5. Resources
  6. Income


Bank accounts that are held with two or more names on the account as “joint owners with right of survivorship” are presumed to be 100% owned by the person applying for Medicaid. For example, Mary’s daughter, Joan, is added to Mary’s bank account as a joint owner to assist her with paying her bills. This is counted as all Mary’s funds for purposes of Medicaid eligibility. However, if the other joint owner can actually prove that the funds on balance are really his/her funds, then the presumption can be overcome. Adding someone as POA only to assist with paying bills from the account will not cause any presumption of ownership and is the preferable method to add someone to an account for this purpose.


The following are non-countable resources under Medicaid law:

  1.  The home is exempt if it is occupied by the applicant’s spouse. However, for a single person, the new rule for the residence is the “intent to return home” rule. A person who is absent from the home (e.g., in a nursing facility) must declare that they intend to return home. The home should then continue to be exempt.
  2.  A home equity interest that exceeds $713,000 (2024 figure) will cause the applicant to be ineligible. However, this restriction does not apply if the community spouse is still residing in the home.
  3. The total cash surrender value of all life insurance policies is a countable resource. All term insurance is exempt.
  4. Irrevocable Pre-Need Funeral contracts for burial expenses and burial plots for the family.
  5. One automobile of any value for the CS. A single person can have one car of any value if it is used for transportation.
  6. Certain trusts except to the extent amounts can be made available to the applicant.
  7. Special exempt Medicaid annuities are non-countable resources under Medicaid law. These are annuity contracts issued by insurance companies but different than the standard policies and they must be set-up according to Medicaid regulations.
  8. Household goods and personal effects in a reasonable amount.
  9. Basic resource limit for an individual is $2000. The limit for a husband and wife both applying for Medicaid is $3000.


The CS is entitled to a Community Spouse Resource Allowance (CSRA) free from spend-down. The amount of this CSRA is 50% of the combined assets. This 50% is subject to a maximum and a minimum allowance. See Ohio Medicaid Figures page for current amounts.

Example #1:
A NHS has assets in his/her name, such as bank accounts and investments, of $60,000.The CS has similar assets of $40,000. The spouses jointly own a house worth $100,000 and bank accounts of $20,000. The spouse resource allowance for the CS is $60,000 ( 1/2 of $120,000). The house is exempt and not included in this calculation. The CS can keep $60,000 free from Medicaid spend-down in addition to the $2000 of the NHS. They must spend down until their assets are $62,000 or less.

Example #2:
Total assets of both spouses are $300,000. The spouses jointly own a house worth $100,000. Let’s assume the spouse maximum resource allowance for the CS is $119,220. Although one-half of $300,000 is $150,000, the maximum allowed CSRA for the current year is $119,220. The CS can keep only $119,220 in addition to the $2000 of the NHS. They must spend $178,780 of the combined assets towards nursing home costs until he/she will qualify for Medicaid. In other words, they must spend down until their assets are $121,220 ($119,220 + 2000).


Income Rules: Eligibility

Income eligibility is determined by comparing the applicant’s countable income to one or more standards.  If income is less than or equal to the applicable standard, then income eligibility is established. If it is over the standard (even one dollar over), the applicant is ineligible.   If the applicant does not pass the income test, they can create a special trust called a Qualified Income Trust (aka Miller Trust) which can be used to achieve eligibility.

Income Rules: Post-Eligibility

In general, all of the NHS’s income must be paid to the nursing home. Medicaid pays the difference between the nursing home bill less the NHS’s income, taking into account certain allowances to said spouse. The CS is entitled to keep all of his/her income (e.g., his/her social security, pension, annuity etc..) that is payable in his/her sole name.

Determining who receives what out of the NHS’s income involves some detailed calculations. The following is an example of how this works.

Assume the NHS’s monthly income is $2500 and the CS’s income is $1300. The standard utility allowance, homeowner’s insurance and property taxes are $700. The Minimum Monthly Maintenance Needs Allowance (MMMNA) for the CS calculates out to be $2003. Thus, the Monthly Income Allowance (MIA) will be $703 (2003-1300). Therefore, the $2500 income of the NHS is distributed as follows: a) $703 to CS; b) $50 personal needs allowance to NHS; c) $1747 to the nursing home. Also, note that MMMNA may not exceed $2981.*

* This and other $ figures discussed herein are adjusted for inflation on an annual basis.


Any transfer of resources within the five year lookback period made by an applicant or his/her spouse to the extent uncompensated, incurs a period of ineligibility (IP) for Medicaid. The  “lookback” period is five years prior to the first date the individual is both an institutionalized individual and has applied for Medicaid. However, the start of the penalty period is the date when the individual  applies for Medicaid and would otherwise have been eligible for Medicaid coverage but for the transfer. In other words, the penalty period does not begin until the nursing home resident has less than $2000  and cannot afford to pay the nursing home bill during this ineligibility period. The ineligibility period is determined by dividing the total transfers by the official Medicaid private pay rate.

The Medicaid ineligibility period is equal to the time period determined by application of steps a-c below.

a. First, the total uncompensated values of all gift transfers within the five year look-back period are aggregated.

b. Second, the total combined amount (determined under a. above) is divided by official Medicaid private pay rate  determined as of the date of application for benefits, not on the date(s) of the transfer(s).

c. Third, the period of ineligibility determined under the first two steps begins on the date when the individual transferring the assets applies for Medicaid and would otherwise have been eligible for Medicaid coverage but for the transfer (i.e., has spend down to less than $2000 or other spend down level).

There is no de minimis rule for a  $18,000  transfer (formerly $10,000) as there is under federal gift tax law.


Mary is a single, widowed person. Mary gifts $12,816 to each of her three children for a total of $38,448 on  8/1/06. She has a remaining estate of $245,000.  The period of ineligibility for this transfer is 8  months ($38,448/$4806). The penalty rate of $4806 is used for illustrative purposes in this example; it is not the correct current rate.   Let’s assume that Mary has an unexpected stroke in November of 2006 and enters a nursing home on  12/1/06. She resides there for the next 3.5 years paying the nursing home’s bill at a rate of $70,000 each year ($5833/mo.). On  5/31/10 she runs out of money with a bank balance now less than $2000. She applies for Medicaid. The result will be that she will be ineligible for the next 8  months starting on 6/1/10. The $38,448 transfer on 8/1/06 is within the new 5 year lookback period. She will become  Medicaid eligible on 2/1/11. However, the nursing home will have legal grounds for discharging her since she is not paying her bill starting on 6/1/10. If her children still have the $38,448 almost 5 years later, they could pay the bill. However, they would use up this amount in December of 2010 after paying for 6.59 months ($38,448 / $5833 = 6.59). Mary would owe for about one half of December and January. Mary would still not be eligible for Medicaid until 2/1/11.


Be careful making outright transfers. You are giving up all rights in your life savings with an unenforceable promise that your children (or other trusted persons) will hold and use this money for your benefit. Any arrangement recognizing this understanding (e.g., partnership, corporation or other writing) would be within the definition of “trust or similar legal device” and subject to the trust rules. Property in the children’s name could be lost due to divorce, bankruptcy or death. There can also be substantial estate and income tax disadvantages to an outright transfer of a residence or other property. For example, a gift transfer of your residence to a child would result in a loss of the step-up in basis in your estate and upon the later sale of the residence by the child would result in taxable gain to the child based upon your original cost. If you choose to make transfers, you should take steps to legally protect yourself and make sure you are able to pay for nursing home costs during the period of ineligibility.


Even though ERISA and state law provide protection from creditors for such accounts, there is no such provision in the Medicaid rule. The issue for purposes of Medicaid eligibility is whether the account is a countable resource and whether eligibility is approved.
A retirement plan account is a countable resource if the person has an ownership interest and the legal ability to convert it to cash. Thus, if the plan allows withdrawal from the plan balance, then it is countable. An IRA or non-IRA types of retirement plans may be non-countable if the account owner has been taking the required minimum distribution (RMD) which is calculated under federal income tax law or otherwise has been taking regular periodic distribution.


The first issue is whether an  annuity owned by an applicant is considered a countable resource.  The answer depends on whether the terms of the annuity contract allow the owner to cancel the contract or withdraw the balance.  To the extent funds can be withdrawn, it is a countable resource. A “deferred annuity” typically will be a countable resource since the owner can withdraw funds.  If the annuity has been annuitized, the owner often does not have a right to cancel or withdraw funds. This is called an “immediate annuity.”

Specific Medicaid provisions govern whether the purchase of the annuity (i.e., an immediate annuity) is considered a transfer of assets. The general rule is that such a purchase is a transfer.  However, the rules provide the following exception for a purchase of an immediate annuity that will not be considered a transfer : 1) the State is named as beneficiary for at least the total amount of benefits paid under Medicaid; 2) the CS is named primary beneficiary with the State as the secondary beneficiary. Another separate exception is provided for  the purchase of an annuity in either of the following categories: 1)  an annuity that is part of an IRA, SEP-IRA, or Roth IRA; 2)  an annuity that is irrevocable, non-assignable, actuarially sound and provides for equal payments. These latter two categories must also name the State as the beneficiary as provided in the first exception.

The person who receives the annuity payments is the annuitant. After the death of the annuitant, it is the “beneficiary” who continues to receive the payments.


An applicant with income over the income standard is ineligible for Medicaid even if one dollar over the limit. The income standard is adjusted for inflation every year. For the current Medicaid standard, see Ohio Medicaid figures below. The figure used is the gross income of the applicant before any deductions. If the person does not pass the income test, they can create a special trust called a Qualified Income Trust (aka Miller Trust) which can be used to achieve eligibility. This must be done prior to the first month of expected eligibility or immediately if the applicant has not already spent down to less than the resource limit.

The purpose of the Qualified Income Trust (aka Miller Trust) is to maintain income eligibility for Medicaid payment of the nursing home/ assisted living costs. The income (social security, pension, annuity, etc..) must be transferred into an account in the name of this trust each month. The applicant then applies the monthly income deposited in the trust according to the patient liability determinations of the Ohio Department of Medicaid. You cannot transfer any other resources or funds into the account in the name of the trust. The trust is only allowed to hold the income of Medicaid recipient.


  1. Exemptions – Make full use of all items considered as non-countable resources as discussed above.
  2. Outright transfers to children or other persons? See above.
  3. Annuity contract from an insurance company: A purchase of an annuity contract by the community spouse, if done properly and in accordance with the new DRA rule, can protect potentially all of the estate. The annuity contract and declarations must also be in compliance with the Medicaid annuity rule. Certain types of annuities, if properly structured, are not considered a countable resource under Federal Medicaid regulations and the applicant would be immediately eligible for Medicaid. Many annuities sold by life insurance agents are countable resources and will not offer you a Medicaid planning advantage. The terms of the annuity contract and information on the contract schedule must comply with Medicaid annuity regulations and it is very important that you obtain legal advice prior to the purchase of the annuity in order to assure compliance with Medicaid law.
  4. Irrevocable Medicaid Trust – Part or all of the estate could be held in a trust that would be protected after the ineligibility period related to the transfer has expired. The terms of the trust must be drafted carefully in order to avoid being considered an available resource under Medicaid regulations. The common form of a Revocable Living Trust would not work. A Revocable Living Trust is a fully countable asset under Medicaid law.
  5. Divorce (prior to NH entry) : As a last resort, spouses could get a divorce and possibly the CS would obtain more than the CSRA. If the division of property in the divorce is not more favorable for the CS than the CSRA and other exemptions then the divorce does not accomplish anything with respect to preserving more assets for the CS. This would have to be done before the CSRA snapshot date or it would not have any effect on the Medicaid determination of the CSRA and resources.
  6. Spousal Refusal :  The CS could sign a “spousal refusal” and refuse to apply assets in his/her sole name toward spend-down. Eligibility must then be granted if the NHS has resources less than $2000. The State is subrogated to the right of support against the CS who would then be sued by the State. This option may be successful in appropriate circumstances.
  7. Reverse Mortgage: A reverse mortgage is a special type of loan that enables a person aged 62 or older to convert some of their home’s equity into tax-free cash. No repayment is required until the home is no longer the person’s principal residence either because they move out or passed away. The loan could be in the form of a monthly payment to the homeowner, an equity line of credit or a lump sum. This planning option can provide additional funds for care to allow the person to remain in their home. The equity in the house would of course decrease and, thus, this option does not protect any of the estate.

There are many possible strategies and plans to qualify for Medicaid and preserve assets. Each person has unique circumstances and there is no one strategy that is best for everyone. Therefore, it is best to seek legal advice before taking any action.


Estate recovery is the procedure whereby the State of Ohio will seek to be reimbursed for all Medicaid benefits paid against the estate of the Medicaid recipient after he/she has died.

For example, let’s assume John Smith enters a nursing home. His wife, Mary, is in good health and continues to live at their home. For the next two years, John and Mary pay for nursing home expenses out of their savings. After two years, John meets the resource and other requirements for Medicaid eligibility. Mary can still keep the house (worth $100,000), her spousal resource allowance ($87,000) and a car ($20,000). For the next two years, Medicaid pays for the nursing home in the total amount of $80,000. John passes away after a two year residency at the nursing home and Mary passes away three years later. There is no estate recovery until Mary passes away. At that time, The State of Ohio will file a claim against her estate for $80,000 and be reimbursed out of the estate property.

In addition to estate recovery, there are also procedures for placing a lien on property. The law distinguishes between the circumstances under which a lien can be placed and on the actual recovery against the estate. When discussing these rules, keep this distinction in mind and don’t confuse the lien rules with the related estate recovery rules. A lien is a charge against property and, like a mortgage, gives the person holding the lien an ownership-type interest in the property up to the amount of money owed to them. The State of Ohio may place a lien against a Medicaid recipient’s real estate (residence or other realty) regardless of their age and before their death.

The Ohio statute initially adopted the narrow probate property definition of “estate.” Thus, there was no estate recovery against any property that did not require probate (e.g., joint and survivorship property, property in a trust, life insurance proceeds). However, in June of 2005, Ohio House bill 66 was enacted into law expanding the Medicaid estate recovery program to reach all non-probate property such as life insurance, annuities, JTWRS accounts, POD bank accounts, TOD securities accounts, TOD real estate, IRA’s, life estates, trusts and any other property in which the Medicaid recipient or spouse had any partial legal title or interest at the time of death.


  • Spousal Resource maximum $154,140
  • Spousal Resource minimum $30,828
  • Minimum spousal income allowance (MMMNA) $2465.00
  • Maximum spousal monthly income allowance (MIA) $3853.50
  • Income eligibility level (Institutionalized) $2829