Texas holds long-term care Medicaid applicants to a $2,000 individual countable-asset limit, which is one of the strictest in the country and the reason spend-down planning is unavoidable for most Dallas-Fort Worth families. Coverage is delivered through STAR+PLUS managed long-term services and supports. Verify the current 2026 figures with the state before relying on them.
Spend-down does not mean spending money badly. It means converting countable resources into things that are exempt or genuinely needed, documenting every step, and avoiding transfers that trigger a penalty. Applications for this area are handled through the county or regional offices serving Dallas, Tarrant, Collin and Denton counties.
Texas adds one more consideration most states apply more gently: an aggressive Medicaid Estate Recovery Program that files a claim against the probate estate after the recipient dies.
In This Article
Countable Versus Exempt in Texas
Countable resources include checking and savings, investment accounts, certificates of deposit, non-homestead real estate, some annuities, and the cash surrender value of life insurance. Against a $2,000 ceiling, almost any accumulated savings puts an applicant over.
Typically exempt are the homestead within equity limits, one vehicle, household goods and personal effects, and irrevocable burial arrangements. Income is assessed separately: an applicant can be under the resource limit and still owe a substantial monthly co-payment toward care once eligible.
The Policy Nobody Counted
Here is where families get caught. Life insurance is disregarded only when the combined face value of all policies on one insured is $1,500 or less. Once total face value exceeds that, the cash surrender value of the policies becomes a countable resource.
A $300,000 universal life policy with $26,000 of accumulated cash value is thirteen times the entire Texas resource limit on its own. That single line item can be the difference between an approval and a denial, and it is regularly discovered late — when the caseworker requests a surrender value statement from the carrier.
Look-Back Rules and the Gift Trap
Texas applies the federal 60-month look-back to transfers made for less than fair market value. Give a policy, a car or a chunk of savings to a child inside that window and the state calculates a penalty period during which Medicaid will not pay for care, even though the money is already gone.
A sale is different. Selling a policy on the secondary market for fair market value exchanges an asset for cash of comparable value; nothing left the household for free. That is why an elder law attorney will treat a policy sale and a policy gift as entirely separate acts, even though both remove the policy from the applicant’s name.
| Texas long-term care Medicaid (2026) | Figure or rule |
|---|---|
| Individual countable-asset limit | $2,000 — verify current figure |
| Program | STAR+PLUS managed long-term services and supports |
| Transfer look-back | 60 months for less-than-fair-market-value transfers |
| Life insurance disregard | $1,500 total face value; above that, cash surrender value counts |
| Estate recovery | MERP claim against the probate estate after death |
| Where to apply | County or regional offices serving Dallas, Tarrant, Collin, Denton |
Spend-Down Tools That Work
The usable options are practical ones. An irrevocable funeral trust and a prepaid burial contract convert cash into an exempt arrangement the family will need anyway. Home repairs and accessibility modifications — a roof, HVAC, a ramp, a walk-in shower — convert countable dollars into value inside an exempt homestead. Replacing an unreliable vehicle works within the one-vehicle exemption. A written caregiver agreement can pay a family member fair value for care actually provided, if it is signed in advance and documented.
Where one spouse remains at home, resources can be allocated to that spouse up to the community spouse resource allowance. Keep contracts, invoices and dated receipts for all of it; unexplained withdrawals are the fastest route to a request for more information.
MERP: What Happens After
Texas runs a Medicaid Estate Recovery Program that files a claim against the probate estate of a deceased recipient for long-term care benefits paid. In practice this most often reaches the homestead, which is exempt during life but part of the estate at death.
Certain exceptions and hardship waivers exist, and how property is titled affects whether it passes through probate at all. This is precisely the kind of question a licensed Texas elder law attorney should answer for your family’s facts — it is not something to guess at from a website.
Sequencing a Policy Sale Correctly
Order of operations matters. Ask the carrier in writing for the cash surrender value and the reduced paid-up death benefit. Have the policy reviewed for secondary-market value. If a settlement clearly beats surrender, complete the sale, then apply the proceeds to legitimate spend-down before filing so the resource picture is clean on the application date.
Build in time. Settlements typically take 60 to 120 days from submission to funding, with payouts commonly cited between 10% and 35% of face value; the GAO’s 2010 study (GAO-10-775) found settlements paying several times what surrender would have produced. Starting this conversation after a facility admission is starting it late.
Bridging the Months Before Coverage
Even a well-prepared application takes time to process, and at DFW nursing home rates — roughly $6,500 a month for a semi-private room in 2026, a ballpark figure worth verifying against the latest CareScout/Genworth survey — a pending period gets expensive quickly. Families bridge it with savings, family contributions, or by converting an asset they had stopped thinking about.
An unneeded policy with a $100,000 or larger death benefit is one of those assets. Send the policy cover page for a free policy review with no obligation, or call (305) 209-7183. Pine Lake Life Solutions reviews the policy at no cost, typically pays more than cash surrender value, and you remain in control of every decision. Nothing on this page is legal advice; work with a licensed Texas elder law attorney on your application.
This page is educational only and is not legal, tax, or investment advice. Confirm every 2026 figure with the agency involved or a licensed Texas professional before acting.
Frequently Asked Questions
What is the Texas asset limit for long-term care Medicaid?
Texas uses a $2,000 individual countable-asset limit, among the strictest in the country. Verify the current 2026 figure with the state, and remember that income is evaluated under a separate test.
Does my mother’s life insurance count against that limit?
If the total face value of all policies on her exceeds $1,500, the cash surrender value is generally countable. The death benefit itself is not counted while she is living, but the cash value is, and it frequently exceeds the $2,000 ceiling by itself.
Can we transfer the policy to a child instead of selling it?
That is a transfer for less than fair market value and can trigger a penalty period under the 60-month look-back. A sale at fair market value brings comparable value back into the household and is treated differently.
How aggressive is Texas about estate recovery?
Texas administers MERP actively and files claims against probate estates for long-term care benefits paid. Exceptions and hardship waivers exist, and how property is titled affects exposure. Ask a Texas elder law attorney about your situation.
What is a caregiver agreement?
It is a written contract paying a family member fair market value for care actually provided. Signed in advance and documented, it converts countable cash into paid services. Written after the fact, it looks like a gift.
Do I have to spend down to exactly $2,000?
The applicant’s countable resources must be at or below the limit on the relevant date. Spending should go toward exempt assets, needed goods and services, or a community spouse’s allowance rather than being given away.
Should we surrender the policy to get under the limit?
Only after comparing. Surrender pays the insurer’s contract value; a secondary-market sale often pays more. Get both numbers before deciding, and allow 60 to 120 days if you pursue a sale.
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Related Reading
- Texas Medicaid Asset Income Limits
- Cash Surrender Value Life Insurance
- Life Settlement Vs Surrender
- Filial Responsibility Law Texas
- Education Center
Pine Lake Life Solutions does not purchase life insurance policies and does not provide legal, tax, or investment advice. Information provided is for educational purposes only. Eligibility for any option, including life settlements, is not guaranteed and depends on individual circumstances, policy terms, underwriting, and market conditions. Consult independent legal, tax, or financial professionals before making decisions regarding a life insurance policy.