Medicaid Asset Limits: Exemptions, State Rules, and Look-Back

For most Medicaid long-term care applicants, the asset limit is $2,000 for an individual and $3,000 for a couple, though a growing number of states have raised or eliminated that cap.¹ These limits apply mainly to older adults and people with disabilities who need coverage for nursing homes or home-based care. If you qualify for Medicaid through an income-based pathway — the route used by most working-age adults, children, and pregnant women — your assets are not counted at all.

Who Actually Faces an Asset Test

Medicaid uses two different eligibility methods, and only one of them looks at what you own. Many applicants worry about limits that don’t apply to them.

If you qualify under a Modified Adjusted Gross Income (MAGI) pathway, which covers most children, pregnant women, parents, and adults enrolled through Medicaid expansion, there is no asset or resource test. Only your income, household size, and tax-filing relationships matter.² You can own a home, keep savings, and hold retirement accounts without any of it counting against you.

Asset limits apply to what Medicaid calls “non-MAGI” pathways. These cover seniors age 65 and older, people with disabilities, and anyone applying for long-term care services such as nursing home coverage or home and community-based waiver programs. If you fall into one of these groups, Medicaid will inventory what you own and compare it against your state’s limit before approving benefits.³

What Counts as an Asset

Medicaid counts resources that are liquid or could be converted to cash relatively quickly. The most common countable items are:

Cash, checking and savings accounts, and certificates of deposit.
Investments such as stocks, bonds, and mutual funds.
Real estate beyond your primary residence, including vacation homes, rental properties, and vacant land.
Retirement accounts. IRAs and 401(k)s are generally countable when they are not being drawn down. Many states exempt an account in payout status, though the monthly distributions then count as income instead. A handful of states count these accounts either way, so state rules matter here.
Life insurance with cash value. Whole life policies are countable if their combined face value exceeds a threshold, which is $1,500 in most states and higher in some. When the face value stays under the limit, the policy is exempt. When it exceeds the limit, Medicaid counts the cash surrender value rather than the face value.

Each asset is valued at its current fair market value or its cash surrender value, depending on the type. The total of your countable assets is what gets compared against the eligibility limit.

What Is Exempt

Several categories of property are sheltered from the calculation. These exemptions can be substantial and often make the difference between qualifying and being denied.

Your Primary Residence

A home you live in is generally exempt. The exemption also applies if your spouse or a dependent relative lives there, or if you are in a nursing facility but express an intent to return home, even if returning is unlikely as a practical matter.⁴ That intent can be stated in a simple letter or affidavit. Once you or a representative indicate you do not plan to return, the home becomes a countable asset.

There is an equity ceiling. For 2026, federal rules require any state cap on home equity to fall between $752,000 and $1,130,000, with each state choosing a figure in that range.⁵ If your equity exceeds your state’s cap and no spouse or dependent lives in the home, Medicaid can treat the excess as a countable resource.

Other Common Exemptions

One vehicle used for transportation, typically regardless of value.
Household goods and personal belongings such as furniture and clothing.
A limited burial fund, often $1,500, plus any irrevocable prepaid funeral contract. Because an irrevocable contract locks the money to funeral expenses, Medicaid ignores it.
Term life insurance policies, which carry no cash surrender value.

How Limits Vary by State

The federal Supplemental Security Income program sets a baseline of $2,000 for an individual and $3,000 for a couple, and most states use those same figures for their long-term care programs.¹ The numbers have not changed in decades, so inflation has tightened them in real terms.

States have flexibility to raise the floor. Several set limits at $10,000 or more for individuals, and a few, including California, have eliminated asset testing for most Medicaid applicants entirely.³ Because the spread across states is so wide, confirming the current figure with your state Medicaid agency before making financial decisions is the only reliable way to know your actual limit.

Rules for Married Couples

When one spouse needs nursing home care and the other stays in the community, federal “spousal impoverishment” rules keep the at-home spouse from being left with almost nothing. Without those protections, the couple’s combined assets would have to fall below the standard $2,000 or $3,000 threshold.⁶

The Community Spouse Resource Allowance

The Community Spouse Resource Allowance (CSRA) lets the at-home spouse keep a portion of the couple’s combined countable assets, subject to a federal floor and ceiling that adjust each January. For 2026, the minimum CSRA is $32,532 and the maximum is $162,660.⁵ States calculate the exact figure based on total countable assets at the time one spouse enters a facility. A common approach lets the community spouse keep half, as long as the result falls between the minimum and maximum.

Monthly Income Protection

The community spouse may also keep some of the institutionalized spouse’s income if needed to reach a minimum standard of living. For 2026, the minimum monthly maintenance needs allowance is $2,643.75 (effective July 1, 2025) and the maximum is $4,066.50.⁵ If the community spouse’s own income already exceeds the maximum, no additional income diversion is allowed.

The Look-Back Period and Transfer Penalties

Medicaid reviews the previous five years (60 months) of financial transactions when you apply for long-term care coverage. Assets you gave away, sold below market value, or transferred without receiving fair compensation during that window can trigger a penalty period during which Medicaid will not pay for nursing home or home-based care.⁷

The penalty is calculated by dividing the total value of the disqualifying transfers by a “penalty divisor,” which is roughly the average monthly private-pay cost of nursing home care in your state. That divisor ranges from around $6,000 to over $15,000 per month, so the same dollar transfer can produce very different penalty lengths in different states. The result can include partial months. If the math yields 10.8 months, you are ineligible for 10.8 months.

The penalty period does not start when the transfer happened. It starts when you are in a facility and have otherwise qualified for Medicaid, meaning the gap in coverage hits at the moment you actually need care and have already spent down other resources. A transfer that seemed harmless years earlier can delay benefits when bills are running.

Transfers That Do Not Trigger a Penalty

Federal law protects several categories of transfers, even inside the look-back window.⁷ Home-related exceptions include:

Transfers to a spouse. Any asset, including the home, can be transferred to a spouse without penalty.
Transfers to a blind or permanently disabled child, of any age, either directly or into a trust for the child’s benefit.
Transfers of the home to an adult child who lived there for at least two years before you entered a facility and provided care that delayed institutional placement.
Transfers of the home to a sibling who has an existing ownership interest and has lived there for at least one year before you became institutionalized.

Beyond home transfers, any asset can be transferred without penalty to a spouse or to a trust for a disabled child or a disabled individual under age 65. A penalty can also be reversed if the transfer was made exclusively for a purpose other than qualifying for Medicaid, or if all the transferred assets are returned.

Legal Ways to Reduce Countable Assets

Spending down on legitimate expenses is not a penalty-triggering transfer, because you receive fair value in return. Giving money away for nothing is penalizable; spending money on goods, services, or debts you actually owe is not. Common options include:

Paying off debt. Credit cards, mortgages, car loans, medical bills, and back taxes can all be satisfied, including prepaying a mortgage in full.
Home improvements. Repairs, renovations, and accessibility modifications to an exempt home reduce countable assets while adding value to a sheltered resource.
Buying exempt assets, such as a more reliable vehicle or replacement household goods.
Prepaying funeral and burial expenses through an irrevocable plan, which permanently removes the money from countable assets.
Purchasing a Medicaid-compliant annuity. For married couples, converting a lump sum into an annuity that pays income to the community spouse can protect assets, but the annuity must be irrevocable, non-transferable, actuarially sound, and name the state Medicaid agency as remainder beneficiary after the community spouse.⁷

Prepaying for services you have not received yet is a common trap. Paying rent, utilities, or medical care months in advance can be treated as a gift rather than a legitimate expense. The safest spend-down targets are debts already owed and tangible purchases you take possession of right away.

Irrevocable trusts, sometimes called Medicaid Asset Protection Trusts, are another planning tool. Assets placed into a properly structured irrevocable trust are no longer yours and do not count. But any transfer into such a trust within the 60-month look-back window is treated as a gift and triggers a penalty. Funding the trust at least five years before applying for benefits is what makes the strategy work, which is why it requires planning well ahead of any health crisis.

Estate Recovery After Death

Qualifying for Medicaid is not the end of the asset conversation. Federal law requires every state to seek repayment from the estate of a Medicaid enrollee age 55 or older who received nursing facility services, home and community-based services, or related hospital and prescription drug services.⁷ Under the Medicaid Estate Recovery Program, a home you sheltered during your lifetime can still be at risk after you die.

Protections exist. States cannot pursue recovery while a surviving spouse is alive, regardless of where the spouse lives. Recovery is also barred if the deceased is survived by a child under 21 or a child who is blind or permanently disabled.⁸ Once those protected individuals are gone, for instance after the surviving spouse passes, the state can pursue its claim.

Every state must also provide a hardship waiver process for heirs. Federal guidance suggests hardship may exist when the estate is a family’s sole income-producing asset (such as a working farm), when the home is of modest value relative to the area, or when other compelling circumstances would make recovery unjust. The specifics vary by state, and the burden of proving hardship falls on the heir requesting the waiver.

Estate recovery is the reason Medicaid asset planning does not end at the eligibility determination. If protecting a home for heirs matters, strategies like the caregiver child exception or transferring the home well outside the look-back window need to happen years before a Medicaid application, not after benefits begin.

1
Social Security Administration. 2026 Cost-of-Living Adjustment (COLA) Fact Sheet
2
Medicaid.gov. Eligibility Policy
3
KFF. Medicaid Eligibility and Enrollment Policies for Seniors and People with Disabilities (Non-MAGI) During the Unwinding
4
U.S. Department of Health and Human Services ASPE. Medicaid Treatment of the Home: Determining Eligibility and Repayment for Long-Term Care
5
Centers for Medicare & Medicaid Services. 2026 SSI and Spousal Impoverishment Standards
6
Medicaid.gov. Spousal Impoverishment
7
Office of the Law Revision Counsel. 42 USC 1396p – Liens, Adjustments and Recoveries, and Transfers of Assets
8
Medicaid.gov. Estate Recovery