Medicaid Planning in Texas: A 2026 Guide to Qualifying for Long-Term Care

Medicaid planning in Texas means arranging your income, assets, and legal documents so you qualify for long-term care Medicaid. In 2026, a single applicant can have up to $2,982 a month in income and $2,000 in countable assets. The goal is to qualify while protecting your home and your spouse.

Planning works best more than five years before care is needed, because Texas reviews every transfer made in the 60 months before you apply.

Long-term care in Texas is expensive. The median cost of a private room in a Texas nursing home is approximately $7,604 per month, or about $91,250 annually, according to the 2025 CareScout Cost of Care Survey. For Texans who qualify for Medicaid long-term care benefits, Medicaid generally pays the portion of the nursing home bill that exceeds the resident’s required monthly contribution.

In most cases, the resident must contribute nearly all of their monthly income, after allowable deductions such as the $75 personal needs allowance and certain approved expenses, while Medicaid covers the remaining cost of care. As a result, Medicaid can reduce a family’s out-of-pocket nursing home expenses by tens of thousands of dollars each year, often covering $40,000 to $90,000 or more annually, depending on the resident’s income and the total cost of care.

This guide covers long-term care Medicaid: nursing home care, assisted living, and in-home care through the STAR+PLUS waiver.

Texas Medicaid Eligibility for Long-Term Care

Texas is an income-cap state. For 2026, a single applicant for nursing facility Medicaid or an HCBS waiver cannot have gross monthly income above $2,982. There is no income “spend-down” option in Texas. If income exceeds the cap, the applicant needs a Qualified Income Trust rather than spending the excess down.

2026 Texas Medicaid Limits for Long-Term Care

Source: Texas HHSC, MEPD Handbook. Figures adjust each year

A single applicant must reduce countable resources to $2,000 or less. Certain assets are exempt and do not count toward that limit, including:

• The homestead, up to a home equity limit of $752,000 in 2026, as long as the applicant intends to return home or a spouse, minor child, or disabled child lives there
• One vehicle, regardless of value
• Household goods and personal effects
• Prepaid burial arrangements that include an irrevocable waiver of the right to cancel
• Term life insurance, and whole life insurance with a face value of $1,500 or less

Every other asset, including bank accounts, investment accounts, and additional real estate, counts toward the $2,000 limit.

Do You Medically Qualify?

Financial eligibility isn’t enough. Texas also requires a medical need for nursing-home-level care. Applicants are assessed on how much help they need with daily activities such as bathing, dressing, eating, toileting, and moving around, and on any cognitive impairment such as dementia.

In-home and assisted living care through STAR+PLUS uses the same medical need standard as nursing home care.

The Qualified Income Trust (Miller Trust)

Because Texas caps income rather than allowing a spend-down, applicants whose income exceeds $2,982 a month need a Qualified Income Trust (QIT), often called a Miller Trust. 

The applicant’s income is deposited each month into a dedicated trust account rather than the applicant’s own account. The trust must be irrevocable, and HHSC’s Medicaid for the Elderly and People with Disabilities (MEPD) handbook sets out specific rules for how the trust must be drafted and administered, including which expenses the trust funds may cover. 

A QIT only addresses the income test. It does not exempt or protect assets, so it is typically one piece of a larger plan rather than a complete medicaid planning strategy. 

Caregiver Agreements

Paying a family member to provide care can reduce countable assets without creating a transfer penalty. The agreement must be in writing and signed before the care starts. Pay must be at a fair market rate for the services provided, and payment must cover future care only. Paying back for care already given counts as a gift and triggers a penalty.

Medicaid-Compliant Annuities

Medicaid annuities turn countable savings into an income stream. The annuity must be irrevocable and non-assignable, make equal payments within the owner’s life expectancy, and name the State of Texas as remainder beneficiary. This is mainly used to protect a community spouse in crisis planning.

Protecting the Community Spouse During the Planning Process

When one spouse needs nursing facility care, and the other remains at home, Texas follows federal spousal impoverishment rules. HHSC takes a “snapshot” of the couple’s combined countable resources as of the first day of the month the institutionalized spouse enters a medical facility for a continuous stay. From that snapshot, the at-home spouse, known as the community spouse, is generally entitled to keep half of the couple’s countable resources, subject to a floor and a ceiling. 

For 2026, the community spouse resource allowance is between $32,532 and $162,660. The community spouse may also be entitled to a monthly income allowance, the minimum monthly maintenance needs allowance, of up to $4,066.50 in 2026, drawn from the institutionalized spouse’s income if the community spouse’s own income falls short. 

Importante note: While $4,066.50 is the federal maximum, Texas is one of the states that uses the federal maximum as its standard (minimum) allowance. This means the community spouse is entitled to an allowance up to $4,066.50 without needing to prove excess shelter costs.

Texas does not recognize spousal refusal, so the couple’s combined resources are counted at the snapshot date regardless of whether the community spouse is willing to contribute assets toward the applicant’s care.

The Medicaid Five-Year Look-Back and Transfer Penalties

Texas reviews all transfers made for less than fair market value during the 60 months before a Medicaid application. The 60-month look-back applies specifically to Long-Term Care Medicaid (nursing home and HCBS waivers). It does not apply to regular (community) Medicaid

If HHSC finds an uncompensated transfer, such as a gift to a child or a below-market sale, it calculates a penalty period by dividing the total uncompensated value by the current daily transfer penalty divisor, which is $262.37 for case actions on or after September 1, 2025, and rounding down to whole days. During that penalty period, Medicaid will not pay for nursing facility care, and the clock does not start until the applicant is otherwise eligible and has applied. 

Some transfers are exempt from this rule, including:

• Transfers to a spouse
• Transfers to a disabled child
• Transfers into certain trusts for the sole benefit of a disabled individual under age 65

A limited caregiver child exemption also applies when an adult child lived in the parent’s home for at least two years immediately before the parent’s institutionalization and provided care that delayed the need for facility placement.

Asset Protection Strategies in Texas Medicaid Planning

Several asset protection strategies are available to help safeguard family assets during Texas Medicaid planning:

Enhanced life estate deeds (Lady Bird deeds)

These deeds allow a homeowner to keep control of the property during life, including the right to sell or mortgage it, while automatically transferring it to named beneficiaries at death outside of probate. Because the home passes outside probate, it generally falls outside the reach of the Texas Medicaid Estate Recovery Program.

Irrevocable trusts

Assets placed in a properly drafted irrevocable trust more than five years before an application no longer count towards the asset limit. Although the transfer starts the look-back clock and the loss of control is permanent.

Medicaid-compliant annuities

For married couples, converting excess countable assets into an actuarially sound annuity that pays the community spouse can shift resources from the countable column to an income stream.

Personal service or caregiver agreements

A written, properly compensated contract for care services provided by a family member can convert cash into a legitimate paid arrangement rather than an uncompensated transfer.

Book a Medicaid Planning Consultation with Homestead Estate Lawyers in Austin, Texas

The attorneys at Homestead Estate Lawyers have decades of experience helping Austin families navigate the complex Medicaid planning process. Schedule a free consultation today to explore how to take the next step in accessing care.  

Answers to Your Frequently Asked Texas Medicaid Planning Questions

Does Texas Medicaid take my house? 

Medicaid does not take a home while the recipient is alive if it remains their homestead, especially if a spouse or dependent still lives there. After death, the Medicaid Estate Recovery Program may file a claim against the probate estate, but exemptions and hardship waivers, including protection for lower-value homes going to children, often reduce or eliminate that claim.

What happens if my income is above the Texas Medicaid cap? 

You are not automatically disqualified. A Qualified Income Trust (Miller Trust) lets you deposit the excess income into a dedicated account so HHSC treats you as within the cap. The trust must be set up and funded correctly before or at the time of application.

Can I just give my assets to my children to qualify? 

Gifts made within the 60-month look-back period generally trigger a penalty period during which Medicaid will not pay for nursing facility care. The penalty is based on the value gifted, divided by the state’s daily divisor. Planning transfers well before care is needed, or using strategies that don’t rely on outright gifts, avoids this problem.

How much can my spouse keep if I go into a nursing home? 

Your spouse, the community spouse, is generally entitled to keep between $32,532 and $162,660 in countable resources for 2026, based on half of the couple’s combined resources at the time you enter care, plus a possible monthly income allowance of up to $4,066.50.

Is a Lady Bird deed the same as a Medicaid trust?

No. A Lady Bird deed is a specific type of deed that lets you keep control of your home during life while it passes to named beneficiaries at death outside of probate. It is often used alongside other planning tools, not as a replacement for a trust or QIT.

Do I have to spend down to $2,000 before applying? 

For countable assets, yes, unless the excess can be moved into an exempt category or, for married applicants, allocated to the community spouse under the resource allowance rules. Certain assets, like the homestead within the equity limit and one vehicle, don’t count toward the $2,000 figure at all.

How far back does Texas look at my financial records? 

Sixty months, or five years, from the date of the Medicaid application, for both nursing facility Medicaid and HCBS waiver programs.

Can a non-attorney Medicaid consultant help me for a lower fee?

In Texas, charging a fee to help someone become eligible for or apply for Medicaid assistance without a law license is a criminal offense under the Human Resources Code. Only a licensed attorney can lawfully provide Medicaid eligibility planning advice for a fee.

What if my heirs can’t afford to pay a Medicaid estate recovery claim? 

They can request an undue hardship waiver from HHSC within 60 days of receiving the Notice of Intent to File a Claim. Grounds include low-value homesteads going to lineal heirs with limited income, a property that is the family’s primary source of income, and other documented hardship circumstances.