Protecting the Healthy Spouse: Understanding Medicaid Spousal Impoverishment Rules and Planning Strategies

Considering Medicaid Planning Strategies as Part of Estate Planning

Medicaid planning strategies are an important component of ensuring the healthy spouse is protected. Many married couples are unaware of spousal impoverishment rules. These rules were enacted in 1988 under the Medicare Catastrophic Coverage Act. In this article, I’ll explain this rule. We’ll cover what the rule helps spouses achieve and the ever-increasing importance of advance planning strategies for long-term care.

Overview of Spousal Impoverishment Protections

Too many people find out the hard way that Medicaid planning strategies are critical. Too often, they discover the pitfalls encountered when no planning has occurred. Specifically, they sometimes find one spouse requires skilled nursing care, costs can quickly deplete a couple’s life savings. In this case, the healthy spouse is often left financially vulnerable. Many people wrongly assume that Medicaid will pay for long-term nursing care. But that is not so. Medicaid, a joint federal and state program, helps pay for long-term care. However, only when strict income and asset limits are met.

To prevent the healthy or “community” spouse from becoming impoverished, federal law established spousal impoverishment rules. The aim of the rules is fairly straight-forward. The primary purpose ensures the healthy spouse retains sufficient income and assets to maintain a reasonable standard of living. The rules allow a portion of a couple’s combined assets and income to be reserved. This reservation is for the community spouse, rather than requiring all resources to be spent down before the institutionalized spouse can qualify for Medicaid.

The Key Protections of the Spousal Impoverishment Rules:

1. Community Spouse Resource Allowance (CSRA):
   The community spouse is allowed to keep a certain amount of the couple’s joint assets. In 2025, the federal minimum CSRA is approximately $30,828. The maximum is $154,140. Although, though the exact amount varies by state. Assets above this limit typically must be spent down before Medicaid eligibility is granted to the institutionalized spouse.
2. Monthly Maintenance Needs Allowance (MMNA):
   The community spouse is also entitled to a minimum monthly income, known as the MMNA. If the community spouse’s income falls below the state’s MMNA (which ranges roughly between $2,465 and $3,853 in 2025), a portion of the institutionalized spouse’s income can be allocated to the community spouse to make up the difference.

These provisions ensure the healthy spouse does not become impoverished when the other spouse receives Medicaid-covered long-term care.

Planning Strategies to Preserve the Healthy Spouse’s Lifestyle

Proper legal planning can help couples protect assets and income while meeting Medicaid eligibility requirements. Because Medicaid rules vary by state and change frequently, consulting with an experienced Estate and Asset Protection attorney is essential to correctly structure finances, complete applications, and ensure compliance with all legal requirements.

Some of the common strategies include:

1. Spending Down Strategically:
   Couples can use excess assets to pay for legitimate expenses such as home repairs, medical costs, debt reduction, or purchasing exempt assets like a car or a primary residence. These expenditures reduce countable assets while improving the community spouse’s quality of life.
2. Asset Reallocation:
   Since certain assets are exempt from Medicaid’s asset test—such as the family home (within equity limits), personal belongings, and one vehicle—transferring resources into exempt categories can help protect them.
3. Spousal Refusal (in some states):
   In a few jurisdictions, the community spouse can legally refuse to contribute assets to the institutionalized spouse’s care. Medicaid may still provide coverage, though the state could later seek reimbursement.
4. Use of Trusts:
   Establishing a Medicaid-compliant trust, such as a Community Spouse Annuity or Irrevocable Income-Only Trust, can protect assets and ensure that the community spouse receives a steady income stream while meeting eligibility requirements.

Plan For Success

Medicaid’s spousal impoverishment rules play a crucial role in maintaining the financial stability of the healthy spouse when one partner requires long-term care. With proactive planning, couples can secure needed care without sacrificing the financial well-being of the healthy spouse. Understanding and applying these rules early can make the difference between financial hardship and a preserved standard of living. Most of us don’t know if or when we may require long-term care. But planning for the possibility ensures success in the eventuality it is required. If you would like to know how to successfully plan for the possible need for long-term nursing care, give my office a call at (470) 235-7868.

Looking to find an experienced estate lawyer in the Georgia area who is skilled in asset protection and estate plan preparation? Shannon Pawley is an attorney in Georgia with expertise in estate planning and asset protection. Shannon can provide assistance with creating an estate plan to include making a will and how to establish a trust properly. If you have questions about asset protection or questions about making an estate plan, reach out to Shannon and she will be glad to help answer all the estate planning questions you might have!