How to spend down assets for Medicaid in Texas

Here is a scenario that sends families into a panic. A parent needs a nursing home, has maybe $60,000 in savings, and is told they own too much to qualify for Medicaid. The instinct is to quickly move the money out of reach. That instinct is exactly wrong, and it can cost the family months of denied coverage. The right path is a spend down, and done properly it is completely legal.

This guide explains what a spend down is, what your parent can legally spend money on, and what to avoid. It is educational information, not legal advice. Because the wrong move creates penalties, anything involving significant assets, or a spouse still at home, is worth reviewing with a Texas elder law attorney first. Our Texas Care Funding Playbook is the full workbook version.

What is a Medicaid spend down?

Texas Medicaid for long-term care limits a single applicant to $2,000 in countable assets. If your parent has more than that, they have to reduce it before they qualify. That reduction is called a spend down.

The word trips people up, because it sounds like the money is simply lost. It is not. A spend down means using the excess on your parent's own benefit, on things they need or debts they owe, so that countable money becomes either an exempt asset or a genuine expense. The money is spent, but the family often gets real value for it rather than watching it vanish into a nursing home bill.

What counts, and what is already exempt

Not everything your parent owns counts toward the $2,000 limit. The home is usually exempt, and so is one vehicle, personal belongings, household goods, and a prepaid funeral. What counts is the liquid money: bank accounts, most investments, and second properties. A spend down deals only with the countable side. Our guide on how to pay for a nursing home in Texas explains the full income and asset picture.

What you can legally spend money on

These are all legitimate ways to reduce countable assets without triggering a penalty:

• Pay off debt. A mortgage, a car loan, or credit card balances. Clearing real debt is not a gift.
• Home repairs and modifications. A new roof, plumbing, a wheelchair ramp, or grab bars. This spends money and can make the exempt home safer or more valuable.
• A reliable vehicle. One vehicle is exempt, so replacing an old car with a dependable one converts countable cash into an exempt asset.
• A prepaid, irrevocable funeral and a burial plot. These are exempt and remove a real future burden from the family.
• Medical and dental care. Hearing aids, dental work, glasses, and other care your parent has put off.
• The cost of care itself. Paying privately for care until savings reach the limit is the most common spend down of all.

The theme is simple: spend on the applicant, for the applicant, and keep the receipts.

Here is what that looks like in practice. Suppose your parent has $50,000 in savings and needs to reach the $2,000 limit. Paying off a $12,000 car loan, replacing a failing 15-year-old vehicle for $18,000, prepaying a $9,000 irrevocable funeral, and putting $6,000 into a new roof and grab bars gets them close to the limit, all on things they genuinely needed, and none of it a gift. The remaining balance goes toward the first month or two of private-pay care. Every dollar was spent on your parent, and every dollar has a receipt.

How long does a spend down take?

There is no fixed timeline. A spend down can happen over a few weeks or a few months, depending on how much has to be spent and on what. What matters is that it is done and documented before, or as part of, the Medicaid application, since the state will review the accounts. Do not rush into large purchases without advice, and do not wait so long that your parent is paying privately for care they could have had covered.

What not to do

The single most expensive mistake is treating a spend down like a giveaway. Do not:

• Give cash to children or grandchildren.
• Sell the house or a car to a relative for less than it is worth.
• Add a family member to a bank account and move money out.
• Pay a relative's bills or tuition.

Every one of these is a gift, and Medicaid looks back five years at gifts. A transfer inside that window is divided by $262.37 a day to set a penalty period during which Medicaid will not pay. Our guide on the Texas Medicaid look-back period explains how that math works and why panic gifting backfires.

How married couples are different

If one spouse needs care and the other stays home, the rules are far more generous, and a blanket spend down is usually the wrong approach. Under spousal impoverishment protections, the community spouse can keep half of the couple's countable assets, up to $162,660 in 2026, plus the home and a car. For couples, more can often be preserved than spent, which is exactly the kind of planning an attorney does.

What to do this week

1. Total the countable assets. Separate the exempt items, the home, a car, personal goods, from the liquid money that actually counts.
2. Make a spend down list, not a giveaway list. Debts to pay, repairs to make, care to buy, a funeral to prepay. Keep every receipt.
3. Do not move a dollar to family until you have advice. That is the move that creates the penalty.
4. Get the timing right. If income is also over the limit, pair the spend down with a Miller Trust, and see how long savings last on our calculator.

A spend down is not a loophole and it is not a loss. It is the legal, intended way to convert excess savings into things your parent needs, so that Medicaid can take over the cost of care. Spend it on them, keep the records, and never mistake a spend down for giving it away.