Texas Medicaid is the largest payer of nursing facility care in the state, and for many families it is the only realistic way to afford long-term care once savings run out. But the rules are technical, the program is administered through several agencies and managed care organizations, and a well-intentioned gift or a missed trust can delay eligibility for months. A Texas Medicaid planning attorney helps you understand how the Texas Health and Human Services Commission (HHSC) counts income and assets, how the five-year look-back works, what a spouse at home can keep, and how to reduce the reach of the Texas Medicaid Estate Recovery Program.
Holmes Law is the practice of Michael Holmes, an attorney licensed in Texas who advises families remotely throughout the state. This page walks through the core rules of Texas Medicaid for long-term care, often called MEPD (Medicaid for the Elderly and People with Disabilities), and the planning tools most often used. It is general information, not legal advice for your situation, and it fits within Holmes Law’s broader Texas elder law practice.
Who Runs Texas Medicaid for Long-Term Care
HHSC is the single state agency that administers Medicaid in Texas. Applications for long-term care Medicaid are filed through Your Texas Benefits, online or with HHSC’s paper application, and are processed by HHSC’s MEPD eligibility staff. Once a person is approved, most long-term services are delivered through STAR+PLUS, the Texas Medicaid managed care program for adults who are 65 or older or who have a disability. The member chooses a STAR+PLUS health plan, and that plan authorizes and coordinates services, including nursing facility care and home and community-based services.
Eligibility has two sides. The medical side asks whether the person needs the level of care the program provides, which for nursing facility care and the STAR+PLUS HCBS waiver means meeting nursing facility medical necessity. The financial side asks whether the person’s income and countable resources fall within program limits and whether any disqualifying transfers occurred. Medicaid planning is mostly about the financial side, though timing the application to the medical need is just as important.
Texas Medicaid Income Rules and Qualified Income Trusts
Texas is an income cap state. For nursing facility Medicaid and the home and community-based waiver programs, an applicant’s gross monthly income must be at or below the special income limit, which HHSC’s MEPD Handbook lists as $2,982 per month for an individual effective January 1, 2026. That figure is tied to three times the federal SSI benefit and generally changes each January.
An applicant whose income exceeds the cap is not automatically ineligible. Texas allows the use of a Qualified Income Trust (QIT), also called a Miller trust. The applicant’s excess income is deposited each month into a dedicated trust bank account, the trust pays the applicant’s share of cost and certain allowed deductions, and the State of Texas is named as the remainder beneficiary for Medicaid paid on the person’s behalf. HHSC publishes a QIT template, and the trust must be set up and funded correctly every month. A missed deposit in a given month can cost eligibility for that month.
After eligibility is established, the resident pays “applied income” to the facility each month. That is the person’s income less a personal needs allowance, which HHSC lists as $75 per month for an individual in 2026, and less allowed deductions such as health insurance premiums and, where applicable, an income allowance for a spouse at home.
Countable and Exempt Assets in Texas
HHSC’s countable resource limit, effective January 1, 2026, is $2,000 for an individual and $3,000 for a couple when both spouses apply. Everything the applicant owns is examined, but many assets are excluded:
- The homestead. A Texas home is excluded if the applicant lives there or intends to return, or if a spouse or certain dependent relatives live there, subject to the federal home equity limit that applies to single applicants. Under H.R. 1 (2025), a $1,000,000 cap on excludable home equity applies beginning January 1, 2028.
- One vehicle used for transportation, generally regardless of value.
- Household goods and personal effects.
- Irrevocable prepaid funeral contracts and burial plots, plus a limited burial fund.
- Certain retirement accounts in payout status, depending on how they are structured.
- Property essential to self-support, such as certain business or income-producing property, within limits.
Countable assets include checking and savings accounts, certificates of deposit, brokerage accounts, cash value life insurance above a small threshold, non-homestead real estate, and assets held in a revocable living trust. A revocable trust is an excellent probate-avoidance tool, but it does not shelter assets from Medicaid, because the grantor can still reach the trust property.
Spousal Impoverishment Protections
When one spouse needs nursing facility care or waiver services and the other remains at home, federal spousal impoverishment rules protect the community spouse. Texas, like other states, counts all resources owned by either spouse, regardless of whose name is on the account or whether it is community or separate property under the Texas Family Code. The couple’s countable resources are then divided as of the first continuous period of institutionalization.
The community spouse keeps a “spousal protected resource amount.” HHSC’s 2026 figures are a minimum of $32,532 and a maximum of $162,660. Texas generally protects one-half of the couple’s countable resources, but not less than the minimum or more than the maximum. The institutionalized spouse must then be at or below the individual resource limit.
On the income side, the community spouse may receive a monthly maintenance needs allowance from the institutionalized spouse’s income if the community spouse’s own income is low. HHSC lists the 2026 community spouse monthly income maximum as $4,066.50. In appropriate cases, a fair hearing or court order can increase the protected amounts. Couples with resources above the protected amount have planning options, which is where a Texas Medicaid planning attorney can add real value.
The Five-Year Look-Back and Texas Transfer Penalties
Medicaid looks back 60 months from the date the applicant is both institutionalized (or receiving waiver services) and has applied. Any transfer for less than fair market value during that period, such as a cash gift to a child, adding a child to a deed, or selling property to a relative at a discount, is presumed to have been made to qualify for Medicaid unless the applicant can show otherwise.
A transfer does not trigger a lump-sum repayment. Instead, it creates a penalty period during which Medicaid will not pay for long-term care. The length of the penalty is the uncompensated value transferred divided by Texas’s penalty divisor, which is $262.37 per day effective September 1, 2025. Importantly, the penalty does not start on the date of the gift. It begins once the person has applied for Medicaid and would otherwise be eligible, which means a poorly timed gift can leave a family facing a nursing facility bill with no money and no Medicaid.
Some transfers are exempt. Transfers between spouses, transfers to a blind or permanently disabled child, transfers into certain trusts for disabled individuals under age 65, and transfers of the home to specific relatives, such as a caregiver child who lived in the home and provided care for at least two years before institutionalization, may not create a penalty. These exceptions have strict documentation requirements.
Texas Medicaid Estate Recovery (MERP)
Texas began its Medicaid Estate Recovery Program for people who applied for certain long-term care services on or after March 1, 2005. MERP seeks repayment from the estates of recipients who were 55 or older when they received nursing facility care, certain home and community-based waiver services, and related hospital and prescription drug services. HHSC’s rules are in Title 1, Chapter 373 of the Texas Administrative Code, and HHSC uses an outside contractor to administer claims.
Texas has historically limited recovery to the recipient’s probate estate. Assets that pass outside probate, such as accounts with a right of survivorship or a payable-on-death beneficiary, life insurance with a named beneficiary, and real property conveyed by a properly drafted enhanced life estate deed or transfer on death deed, have generally fallen outside MERP’s reach. Recovery is deferred while a surviving spouse is alive, while there is a child under 21, or a child of any age who is blind or permanently disabled, and in certain cases where an unmarried adult child lived in the home. HHSC also recognizes exemptions for small estates and undue hardship waivers, including for modest homesteads. The dollar thresholds for those exemptions have recently been revised, so confirm current figures with HHSC or counsel before relying on them. Heirs must request hardship treatment within a short deadline after receiving MERP’s notice.
Texas Medicaid Planning Tools
Every family is different, but these are the tools a Texas Medicaid planning attorney considers most often:
Enhanced Life Estate Deeds and Transfer on Death Deeds
An enhanced life estate deed, often called a Lady Bird deed, lets the owner keep full control of a Texas homestead during life, including the right to sell or mortgage it, while naming beneficiaries who take the property automatically at death. Because the owner retains control, creating the deed is not treated as a transfer for Medicaid purposes, and the home passes outside probate and outside MERP. A transfer on death deed under Chapter 114 of the Texas Estates Code accomplishes a similar result. Note that an agent under a power of attorney cannot create a TOD deed for the principal, and a later will cannot revoke one, so these deeds should be put in place while the owner has capacity.
Medicaid-Compliant Annuities and Promissory Notes
Converting excess countable assets into an irrevocable, non-assignable annuity that pays out in equal installments over the owner’s actuarial life expectancy, with the State of Texas named as remainder beneficiary as required, can change an asset into an income stream. This is especially useful for married couples, because income paid to the community spouse is generally not counted for the institutionalized spouse. Properly structured promissory notes can serve similar purposes.
Personal Care Agreements
A written agreement to pay a family member fair market value for care going forward, with records of services actually provided, can move money legitimately without creating a transfer penalty. Payments for past care without a prior written agreement are usually treated as gifts.
Trusts
An irrevocable Medicaid asset protection trust must be created and funded more than five years before an application to avoid penalty. A properly drafted Texas irrevocable trust can hold assets for children while the grantor retains limited income rights. For a disabled spouse, child, or grandchild, a Texas special needs trust can preserve their own eligibility for means-tested benefits.
Spend-Down on Exempt Assets
Paying off a mortgage on the homestead, making home repairs, replacing a vehicle, prepaying funeral expenses, and buying needed medical equipment are all legitimate ways to reduce countable assets without penalty.
Crisis Planning Versus Advance Planning
Advance planning, done five or more years before care is needed, offers the widest range of options, including irrevocable trusts and outright gifts. Crisis planning, done when a nursing facility admission is imminent or has already happened, focuses on exempt conversions, spousal protections, annuities, QITs, and careful application timing. Texas families often come in during a crisis, and meaningful protection is still frequently possible, particularly for married couples. What matters most is getting advice before moving money.
How Holmes Law Handles Texas Medicaid Planning
Michael Holmes starts every matter by gathering facts: income sources, account statements for the look-back period, deeds, insurance policies, and existing estate planning documents. From there, Holmes Law can prepare a written plan, draft the necessary deeds, trusts, and agreements, confirm that the client’s Texas durable power of attorney gives an agent the authority the plan requires, and coordinate with the family on application timing. Because Holmes Law is a remote practice, clients across Texas work with Michael Holmes by phone and video, and signing ceremonies can be arranged with a notary near the client. Planning is coordinated with your Texas estate planning so that the Medicaid strategy does not undermine your wishes for your family.
Frequently Asked Questions
What is the Texas Medicaid penalty divisor?
Effective September 1, 2025, HHSC uses $262.37 per day. Uncompensated transfers made during the look-back period are divided by that figure to determine how many days of ineligibility apply.
Do I need a Qualified Income Trust in Texas?
If gross monthly income exceeds the special income limit, which is $2,982 for an individual as of January 1, 2026, a QIT is required to qualify for nursing facility or waiver Medicaid. The trust must be funded every month.
Does putting my house in a living trust protect it from Medicaid?
No. A revocable living trust avoids probate, but its assets remain available to you, so they are counted for eligibility. A homestead in a revocable trust may keep its exclusion, but other assets will not.
Can Texas take my house after I die?
MERP can file a claim against the probate estate of a recipient who was 55 or older when receiving covered services. Planning with an enhanced life estate deed or transfer on death deed, and understanding the deferrals and hardship exemptions, can often protect the home.
Is it too late to plan if my spouse is already in a nursing home?
Usually not. Spousal protections, exempt spend-downs, annuities, and careful timing remain available after admission. The sooner advice is obtained, the more options remain.
Speak With a Texas Medicaid Planning Attorney
Texas Medicaid rules reward careful planning and penalize guesswork. If you or a loved one needs long-term care, or you want to plan ahead, Holmes Law can help you understand where you stand and what can be protected. Contact Holmes Law to schedule a remote consultation with Michael Holmes, and see the Texas long-term care page for more on paying for care.