When you go on Medicaid for long-term care, you can generally keep your home, one vehicle, your personal belongings and household goods, a modest burial fund, some life insurance, funds in an ABLE account, and up to $2,000 in other countable assets ($3,000 for a married couple where both spouses apply). A spouse who stays at home can keep substantially more. The details, and the traps, are what determine whether you actually get to keep everything the rules allow.
The $2,000 Limit and What Counts Toward It
Medicaid sorts everything you own into two buckets. Countable assets are things you could readily turn into cash: bank balances, stocks, bonds, mutual funds, second properties. Exempt assets don’t count at all.
For 2026, the federal baseline for countable assets is $2,000 for an individual and $3,000 for a couple when both spouses are applying. Most states follow that number because they tie their Medicaid resource limits to Supplemental Security Income rules. A handful of states set higher limits, and a few have dropped the asset test entirely for certain Medicaid categories, so your state’s specific threshold is worth confirming before you do anything else.
The exempt list is where the real protection lives.
Your Home
Your primary residence is generally exempt as long as you intend to return to it, even if you’re currently in a nursing facility. That intent-to-return standard is applied broadly; being in a care facility doesn’t by itself disqualify the home.
There is a ceiling on home equity. For 2026, the minimum home equity limit is approximately $752,000, and about ten states have adopted the maximum of roughly $1,130,000. California currently imposes no home equity limit. If your equity exceeds your state’s threshold, the home can become a countable asset, unless your spouse, a minor child, or a blind or disabled child lives there. In that case the equity cap doesn’t apply.
One Vehicle
One automobile used for transportation is exempt regardless of its value in most states. A second car is counted at its fair market value.
Personal Belongings and Household Goods
Furniture, clothing, appliances, and everyday personal items are exempt. Federal law excludes household goods and personal effects from countable resources.1Office of the Law Revision Counsel. 42 USC 1382b – Resources
Burial Funds, Plots, and Prepaid Funerals
You can set aside up to $1,500 per person in a designated burial fund, and a spouse can do the same. The money has to be clearly earmarked for burial expenses and kept in a separate account. Prepaid funeral contracts are also exempt if they’re irrevocable, meaning you’ve given up the right to cash them out. A revocable funeral contract is treated as a countable resource.
Burial plots and spaces for you, your spouse, and immediate family members are separately excluded and do not reduce the $1,500 burial fund allowance.1Office of the Law Revision Counsel. 42 USC 1382b – Resources
Life Insurance
Term life insurance has no cash surrender value, so Medicaid doesn’t count it. Whole life insurance is more complicated because it builds cash value. The general rule in most states: if the total face value of all your life insurance policies is $1,500 or less, the cash value is exempt. Once combined face value exceeds $1,500, the entire cash surrender value becomes countable.
A detail that trips people up: outstanding policy loans reduce the cash surrender value, so if you’ve borrowed against a whole life policy, only the remaining cash value counts. Accumulated dividends held by the insurance company are generally counted as a separate resource even when the underlying policy is exempt.
Retirement Accounts
There are no uniform federal rules on how Medicaid treats IRAs, 401(k)s, and similar accounts for long-term care eligibility. Each state sets its own policy, and treatment depends on the type of account, whether it’s in payout status, and your marital status.
Some states don’t count a retirement account that is actively making regular distributions; instead, the monthly payments are treated as income. Other states count the full balance as an asset regardless of payout status. Others exempt the account for the community spouse but count it for the applicant. Because a retirement balance can easily blow past the $2,000 limit on its own, your state’s specific rule matters before you file.
ABLE Accounts
If you or a family member became disabled before age 26, an ABLE (Achieving a Better Life Experience) account is a strong shelter. Funds held in an ABLE account are not counted as a resource for Medicaid eligibility, regardless of the balance. The annual contribution limit follows the federal gift tax exclusion, and total balances can grow well beyond Medicaid’s normal cap without affecting benefits.2ABLE National Resource Center. Frequently Asked Questions
What a Spouse at Home Can Keep
When one spouse needs nursing home care and the other stays home, a separate set of protections kicks in so the at-home spouse isn’t left destitute. These are the spousal impoverishment rules.3Medicaid.gov. Spousal Impoverishment
Community Spouse Resource Allowance
The Community Spouse Resource Allowance (CSRA) lets the at-home spouse keep a share of the couple’s combined countable assets. For 2026, the federally set range runs from a minimum of $32,532 to a maximum of $162,660.4Centers for Medicare & Medicaid Services. 2026 SSI and Spousal Impoverishment Standards Each state picks a number within that range, and the exact amount the community spouse keeps is calculated from the couple’s total countable assets when the nursing home spouse enters a facility or applies for Medicaid.
Many states use the maximum, so a community spouse can retain up to $162,660 in countable assets on top of exempt property like the home and a vehicle.
Monthly Income Floor
The community spouse also gets a monthly income floor. For 2026, the Minimum Monthly Maintenance Needs Allowance runs from $2,643.75 to $4,066.50 depending on the state and the spouse’s housing costs.4Centers for Medicare & Medicaid Services. 2026 SSI and Spousal Impoverishment Standards If the community spouse’s own income falls below that floor, part of the nursing home spouse’s income is redirected to fill the gap. High housing costs can push the allowance up to the federal maximum.
Transfers That Can Cost You What You’d Otherwise Keep
Medicaid reviews five years of your financial history when you apply for long-term care benefits. Every gift, below-market sale, and asset transfer during that 60-month window is scrutinized. The purpose is to prevent people from giving away property to qualify for benefits the government would then pay for.
If Medicaid finds transfers made without adequate compensation, it imposes a penalty period during which you won’t receive benefits. The penalty is calculated by dividing the total value of the uncompensated transfers by the average monthly cost of nursing home care in your state. Give away $90,000 in a state where nursing home care averages $9,000 a month, and you face a 10-month penalty. The penalty doesn’t start from the transfer date; it starts when you would otherwise be eligible for Medicaid, which means you could be in a facility with no way to pay during the gap.
Transfers That Don’t Trigger Penalties
Federal law recognizes several exceptions, particularly for the home:
- Transfer to a spouse, or into a trust for the spouse’s sole benefit.
- Transfer of any asset, including the home, to a blind or permanently disabled child.
- Transfer of the home to an adult child who lived with you for at least two years before you entered a facility and provided care that delayed your need for institutional care.
- Transfer of the home to a sibling who already has an ownership interest and has lived there for at least one year before your institutionalization.
- Transfer of the home to any child under 21.
The caretaker child exception is the one families most often try to use, and it’s also the one most often challenged. Vague claims won’t hold up. You need contemporaneous medical records and a clear paper trail showing the child lived in the home and provided hands-on care that kept you out of a nursing facility, typically confirmed by a physician’s statement.
Reducing Countable Assets Legally
If your countable assets exceed the limit, you’re allowed to spend them down without triggering look-back penalties, as long as you’re spending on exempt assets or legitimate expenses.
- Pay off a mortgage, credit card balances, or personal loans.
- Make home repairs or accessibility modifications like wheelchair ramps and bathroom safety renovations, which convert cash into exempt home equity.
- Replace an older car, or buy household furnishings.
- Set up an irrevocable funeral trust to prepay funeral costs.
- Pay for dental work, eyeglasses, hearing aids, or other healthcare costs your insurance doesn’t cover.
Keep meticulous records of every dollar. Receipts, bank statements, and a simple spreadsheet can save a legitimate purchase from being mistaken for a disqualifying transfer during the look-back review.
One Thing to Know About the Home After You Die
Qualifying protects your assets during your lifetime, but there’s a catch on the back end. Federal law requires every state to operate a Medicaid Estate Recovery Program (MERP) that seeks reimbursement from the estates of people who received long-term care benefits after age 55.5Medicaid.gov. Estate Recovery Assets that were exempt while you were alive, especially the home, can become recovery targets after death.
Recovery is blocked while a surviving spouse is alive, and blocked if you leave behind a child under 21 or a child of any age who is blind or permanently disabled.5Medicaid.gov. Estate Recovery A sibling with an equity interest who lived in the home for at least a year before your institutionalization is protected from liens during their lifetime.6U.S. Department of Health and Human Services. Medicaid Estate Recovery States also have to offer a hardship waiver process for heirs, though the criteria and deadlines vary by state and heirs have to apply on time to use them.