Spend-down means legally reducing countable assets to the level Texas Medicaid allows, and for a single long-term care applicant that level is $2,000. It does not mean giving money away, and doing it the wrong way can create a penalty that leaves a parent with no assets and no coverage at the same time.
This page explains the Texas rules as they apply to families in the Rio Grande Valley, meaning Hidalgo County. Applications in this area are handled through the county or regional offices serving Hidalgo County, and the same state rules govern whether you live in Mission, Edinburg, Weslaco or one of the Winter Texan communities along Expressway 83.
The part most families miss is life insurance. An old policy is frequently the exact asset blocking eligibility, and how you deal with it matters enormously.
In This Article
- The Numbers That Define the Problem
- Countable Versus Exempt: What Actually Gets Counted
- The Life Insurance Rule Families Trip Over
- Selling Is a Sale. Gifting Is a Transfer.
- Legitimate Spend-Down Categories
- When There Is a Healthy Spouse
- Estate Recovery Comes Later
- Request a Free Policy Review
- Frequently Asked Questions
The Numbers That Define the Problem
Long-term care Medicaid in Texas is delivered through STAR+PLUS managed long-term services and supports. The countable-asset limit for a single applicant is $2,000. Income rules run separately and have their own tests, so being under the asset limit is necessary but not sufficient.
The federal look-back is 60 months. Any transfer made for less than fair market value within that five-year window can trigger a penalty period during which Medicaid will not pay for long-term care, even though the money is already gone. California is the exception to the standard look-back structure; verify its 2026 status if that state is relevant to your family.
Countable Versus Exempt: What Actually Gets Counted
Countable assets generally include bank accounts, investment accounts, certificates of deposit, second properties and the cash surrender value of life insurance above the disregard threshold. Exempt assets typically include the primary residence within limits, one vehicle, household goods and personal effects, and certain irrevocable burial arrangements.
The exempt list is where legitimate spend-down happens. Converting a countable dollar into an exempt one is not a transfer and does not trigger a penalty, because you still own the value; it simply sits in a form the program does not count.
The Life Insurance Rule Families Trip Over
In most states, life insurance is disregarded only when total face value across all policies is $1,500 or less. Above that threshold, the cash surrender value is a countable resource. A parent holding a $150,000 universal life policy with $28,000 of cash value is over the asset limit on that policy alone, regardless of what is in the bank.
Note that the test looks at face value across all policies combined, not one at a time. Three small policies can add up past the disregard just as easily as one large one. Pull every policy in the house before assuming you are clear.
Selling Is a Sale. Gifting Is a Transfer.
This is the distinction that decides outcomes. Signing a policy over to a child for nothing is a transfer for less than fair market value, and within the 60-month look-back it can create a penalty period. Selling the same policy at fair market value is a sale: value out, cash in, nothing given away.
Because a sale is not a gift, it generally should not create a transfer penalty. It does convert an asset into cash, which is fully countable, so the proceeds then need to be spent down through legitimate exempt categories. Sequencing matters, and it should be worked out with a licensed Texas elder law attorney before anything is signed.
| Asset | Usually countable? | Notes for Texas applicants |
|---|---|---|
| Checking and savings | Yes | Counts toward the $2,000 single-applicant limit |
| Life insurance cash surrender value | Yes, above the disregard | Disregarded only if total face value across all policies is $1,500 or less |
| Primary residence | Usually exempt, within limits | Still exposed to MERP estate recovery later |
| One vehicle | Usually exempt | Replacing an unreliable car is a legitimate spend-down |
| Irrevocable funeral trust | Usually exempt | Must be irrevocable; revocable arrangements generally count |
| Gift to an adult child | Not an asset, but penalized | Transfer for less than fair value inside the 60-month look-back |
| Sale of a policy at fair market value | Proceeds are countable | A sale, not a gift, so generally no transfer penalty |
Legitimate Spend-Down Categories
Common approaches include an irrevocable funeral trust, a prepaid burial contract, home repairs and accessibility modifications such as ramps, grab bars, a walk-in shower or a roof replacement, purchasing or replacing a vehicle, and paying off debt including a mortgage.
A caregiver agreement can also work when a family member is providing real care, but it must be a written contract at a reasonable market rate, signed before care begins, with documented hours and reported income. Informal payments to a daughter for helping out are treated as gifts.
In the Valley, home modification is often the highest-value option, because a large share of older residents own their homes outright and the house is exempt while the cash used to improve it is not.
When There Is a Healthy Spouse
Different rules apply when one spouse needs care and the other remains at home. The community spouse is allowed to keep a Community Spouse Resource Allowance, or CSRA, along with a minimum monthly income allowance, so the at-home spouse is not left destitute. Those figures are adjusted periodically; verify the 2026 amounts.
Texas is not a community property outlier for Medicaid purposes in the way people sometimes assume, but marital property characterization can still complicate an assessment. A snapshot of combined countable resources is generally taken as of the date of institutionalization, which makes the timing of any sale or transfer significant.
Estate Recovery Comes Later
Texas runs an aggressive Medicaid Estate Recovery Program. After a recipient dies, MERP files a claim against the probate estate to recoup what the state paid for long-term care. Families frequently assume the exempt homestead simply passes to the children, and are surprised by the claim.
MERP has exceptions and hardship waivers, and Texas probate procedure can affect how a claim plays out. Plan for it while the parent is alive rather than discovering it during probate, and get that planning from a licensed Texas elder law attorney.
Request a Free Policy Review
If the asset standing in the way is a life insurance policy with $100,000 or more in death benefit, send the policy cover page for a free, no-obligation review of whether the secondary market is worth pursuing. Settlements commonly land between 10% and 35% of the death benefit, and GAO-10-775 found sellers received roughly four to eight times cash surrender value. Pine Lake Life Solutions typically pays more than cash surrender value on qualifying policies. Call (305) 209-7183.
This page is educational only and is not legal, tax, or investment advice. Medicaid rules and dollar limits change; verify every figure with Texas Health and Human Services and work with a licensed Texas elder law attorney before making any transfer.
Frequently Asked Questions
What is the Texas Medicaid asset limit in 2026?
For a single long-term care applicant it is $2,000 in countable assets under STAR+PLUS managed long-term services and supports. Income tests are separate. Verify the current figures with Texas Health and Human Services before applying.
How far back does Texas look at transfers?
The federal look-back is 60 months for transfers made for less than fair market value. Transfers inside that window can create a penalty period during which Medicaid will not pay for long-term care. California is the exception to the standard structure; verify its 2026 status separately.
Does my mother’s life insurance policy count?
Generally yes. Life insurance is disregarded only when total face value across all policies is $1,500 or less; above that, the cash surrender value is countable. Add up every policy in the household, not just the largest one.
Can I just sign the policy over to my brother?
That would be a transfer for less than fair market value and could create a penalty period inside the 60-month look-back. Selling at fair market value is a sale, not a gift, and is treated differently. Talk to a Texas elder law attorney before transferring anything.
What can we legitimately spend money on?
Common categories include an irrevocable funeral trust, prepaid burial, home repairs and accessibility modifications, a vehicle, paying off debt, and a properly documented caregiver agreement at a market rate. These convert countable dollars into exempt ones rather than giving value away.
Where do we apply in the Rio Grande Valley?
Applications are handled through the county or regional offices serving Hidalgo County. The rules are statewide, so location within the Valley does not change eligibility. Gather documents before starting, because incomplete applications stall for weeks.
What happens to the house after my parent dies?
Texas runs an aggressive Medicaid Estate Recovery Program that files a claim against the probate estate to recover long-term care spending. Exceptions and hardship waivers exist. Plan for MERP with a Texas elder law attorney while your parent is still living.
Can a spouse at home keep anything?
Yes. The community spouse is allowed a Community Spouse Resource Allowance and a minimum monthly income allowance so they are not left without resources. Those dollar figures adjust periodically, so verify the 2026 amounts before relying on them.
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Related Reading
- Cash Surrender Value Life Insurance
- Life Settlement Vs Surrender
- Texas Medicaid Asset Income Limits
- Filial Responsibility Law Texas
- Sell Life Insurance Policy Mcallen
- Nursing Home Costs Mcallen
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.