Medicaid Planning: Smart Spend-Down Strategies That Actually Work

Navigating the Medicaid application process is no small feat. Between income limits, resource caps, and the maze of rules, it’s easy to feel overwhelmed. But once you’ve cleared the three major hurdles—medical necessity, income eligibility, and resource limits—the next step is figuring out how to legally and effectively qualify for benefits.

This is where spend-down strategies come into play.

What Is a Spend-Down Strategy?

A spend-down strategy is exactly what it sounds like—strategically spending your assets so that you meet Medicaid’s strict financial eligibility requirements. But here’s the kicker: you can’t just give away your money. Medicaid penalizes gifts, even to loved ones or charitable organizations.

But spending? That’s fair game. You can, quite literally, spend your way into Medicaid eligibility—as long as you’re smart about it.

Let’s break down the most effective and legal ways to do just that.

1. Take the Dream Vacation

If your loved one is still healthy enough to travel, now might be the perfect time to take that once-in-a-lifetime trip. Whether it's a family reunion in Florence or a beach getaway with all the grandkids, spending on meaningful experiences is a valid and enriching way to use your resources.

Keep in mind, this option is only viable if the individual is physically able to travel—something that sadly isn't always the case for those seeking long-term care.

2. Pay for Professional Services

Another approved way to spend down assets is to pay for professional services, such as legal or financial planning. Hiring an elder law attorney, for instance, not only helps you strategize correctly but also counts as an allowable expense under Medicaid guidelines.

Important Note (Especially for Texas Residents): Be extremely cautious when paying family members for caregiving. Texas has strict rules around this, and improper payments could jeopardize Medicaid eligibility. You must have airtight documentation and legal agreements in place.

3. Buy Equipment or Home Necessities

Now is the time to purchase big-ticket items that will improve comfort or quality of life. Consider:

• A new smartphone or tablet

• A high-definition flat-screen TV for the nursing home

• Durable medical equipment

• Clothing or furniture

These purchases are not only allowable, but they also make the transition into long-term care more bearable.

4. Pay Off Debts (With Caution)

Settling your debts can be part of your spend-down, but avoid paying informal family loans without rock-solid documentation. Medicaid closely investigates payments to family members to prevent fraud. However, paying off formal debts—like credit cards, medical bills, or loans with proper contracts—can be a wise strategy.

5. Upgrade or Repair Your Home

One of the most overlooked strategies? Invest in your primary residence. Why? Because your home is generally considered a non-countable resource for Medicaid eligibility.

This means you can:

• Repair your roof or flooring

• Remodel a kitchen or bathroom

• Install medically necessary modifications

• Even add a pool or landscaping features

Since the home's value isn’t included in Medicaid calculations, improving it is a savvy way to shelter assets.

6. Purchase a Vehicle

Medicaid allows you to own one car per household. If your current vehicle is old or unreliable, now is the time to upgrade. This can be especially useful if the spouse who remains at home (known as the community spouse) needs reliable transportation.

7. Prepay for Burial and Funeral Expenses

One of the smartest spend-down tactics? Prepaying for burial plots and funeral arrangements. These are excluded resources, and planning ahead eases the financial and emotional burden on your family later.

Final Thoughts: Spend Down, Don’t Give Away

There’s a major difference between spending and gifting. While spending your assets on approved expenses can help you qualify for Medicaid faster, gifting your money to others can result in penalties and delays in benefits.

Medicaid planning is full of nuance. That’s why consulting with an experienced elder law attorney is essential. We know the ins and outs of state-specific rules—especially in Texas—and can tailor strategies that protect your assets and ensure compliance.

Ready to explore your options? Contact our firm today for a personalized Medicaid planning session.