To qualify for long-term-care Medicaid in Texas in 2026, a single applicant can generally keep no more than $2,000 in countable assets — and because Texas is an income-cap state, applicants whose monthly income exceeds the special income limit must route income through a Miller Trust (Qualified Income Trust) to qualify at all. Both figures should be confirmed with Texas Health and Human Services for the current year, but the structure itself has been stable for decades.
The income cap is the feature that surprises Texas families most. In many states, high medical bills can offset excess income; in Texas, income even slightly over the cap — roughly $2,901 per month using the 2025 federal figure, with the 2026 amount to be verified — disqualifies the applicant unless a Miller Trust is in place. The fix is procedural, not impossible, but it must be done correctly and on time.
This guide covers the asset and income tests, spousal protections, the five-year lookback, and a detail many families miss: a life insurance policy’s cash value is usually a countable asset, and selling the policy at fair market value can be a compliant way to fund care during a spend-down.
In This Article
- The $2,000 Countable-Asset Limit
- Texas Is an Income-Cap State: The Miller Trust
- Protections for the Community Spouse
- The Five-Year Lookback and Why Gifting Backfires
- How Life Insurance Is Counted — and the Settlement Option
- Sequencing a Compliant Spend-Down
- Where to Verify the Current Texas Figures
- Frequently Asked Questions
The $2,000 Countable-Asset Limit
Texas uses the figure most states use: a single applicant for institutional (nursing home) Medicaid or home-and-community-based waiver services may keep about $2,000 in countable assets (2026 — verify the current figure with Texas HHS). Countable assets include bank accounts, brokerage accounts, CDs, most retirement accounts depending on payout status, non-homestead real estate, and — critically — the cash value of life insurance above small exemptions.
Exempt assets are meaningful, though. The homestead is generally protected while the applicant intends to return or a spouse lives there, subject to a federal equity cap that adjusts annually. One vehicle, household goods, personal effects, certain burial arrangements, and small term life policies with no cash value typically do not count. The eligibility math is therefore really about the countable column — and about how to reduce it lawfully, which is what a spend-down is.
Texas Is an Income-Cap State: The Miller Trust
Texas applies a hard special income limit — approximately $2,901 per month per the 2025 federal figure (verify the 2026 amount) — rather than a medically-needy spend-down of income. If the applicant’s gross monthly income is even a dollar over the cap, the application fails unless the excess flows through a Miller Trust, formally a Qualified Income Trust (QIT).
A Miller Trust is a narrow legal instrument: income is deposited into the trust each month, the trust pays the required amounts toward care, and the state is the remainder beneficiary for amounts up to what Medicaid has paid. Key practical points:
- The trust must be properly drafted and the income actually routed through it — a signed document with no deposits does not work.
- It should be in place for the first month eligibility is needed; retroactive fixes are limited.
- Social Security, pensions, and annuity payments all count toward the cap.
An elder law attorney typically sets one up quickly and affordably. Do not abandon an application over the income cap — it is the most fixable barrier in Texas Medicaid.
Protections for the Community Spouse
When one spouse needs facility care and the other remains at home, federal spousal impoverishment rules prevent the at-home (community) spouse from being stripped bare. In 2026, the community spouse may retain a Community Spouse Resource Allowance (CSRA) up to roughly $157,920 — that is the 2025 federal maximum; verify the 2026 figure — plus the homestead within equity limits, one vehicle, and their own income.
Where the community spouse’s own income is low, a Minimum Monthly Maintenance Needs Allowance can shift some of the institutionalized spouse’s income to the community spouse before the nursing home share is calculated. These protections mean a married couple’s planning conversation is very different from a single applicant’s — and it is one more reason to run the numbers with a professional before assuming a spouse’s savings are all at risk.
| Texas Long-Term-Care Medicaid Rule | 2026 Figure (verify with Texas HHS) | Notes |
|---|---|---|
| Countable-asset limit (single applicant) | ~$2,000 | Cash value of life insurance above small exemptions counts |
| Special income limit (income cap) | ~$2,901/month (2025 federal figure — verify 2026) | Income over the cap requires a Miller Trust (QIT) |
| Community Spouse Resource Allowance | Up to ~$157,920 (2025 federal max — verify 2026) | Plus homestead within equity limits and one vehicle |
| Lookback period | 5 years | Gifts and below-market sales trigger penalty periods |
| Fair-market-value sale of a policy | No penalty | A life settlement converts a countable asset to spendable funds |
| Typical settlement range (GAO-10-775) | ~10–35% of face value | Roughly 4–8x cash surrender value; process 60–120 days |
The Five-Year Lookback and Why Gifting Backfires
Texas, like every state, examines five years of financial history before the application date. Assets given away or sold below fair market value during that window trigger a penalty period — a stretch of ineligibility calculated by dividing the gifted amount by the state’s average monthly cost of care. The penalty does not start until the applicant is otherwise eligible and in need of care, which is precisely when a family can least afford it.
The rule that rescues many plans: selling an asset for fair market value is not a gift. Converting a life insurance policy, a boat, or a rental property into cash at market price produces no penalty — it simply moves value from one column to another, after which the cash can be spent on care, the applicant’s needs, or other permitted purposes. The trap is undervalued transfers to family, not sales.
How Life Insurance Is Counted — and the Settlement Option
Life insurance is where Texas families most often stumble. The usual rule: term insurance with no cash value is not counted, and small whole life policies under a modest total face-value exemption may be excluded, but cash value above the exemption is a countable asset. A $150,000 universal life policy with $20,000 of cash value can single-handedly blow the $2,000 limit.
Families typically see three options: surrender the policy for its cash surrender value, let it lapse, or sell it in the secondary market. A life settlement often dominates the first two: the GAO’s study of the market (GAO-10-775) found sellers typically received 10% to 35% of face value — roughly 4 to 8 times surrender value. Because the sale is at fair market value, it creates no transfer penalty; the proceeds then fund the spend-down on care, home modifications, prepaid burial, or other compliant uses. See life settlement vs. surrender for the comparison and what policies qualify for the screening criteria.
Sequencing a Compliant Spend-Down
Order of operations matters more than most families expect. A workable sequence often looks like:
- Inventory everything — accounts, policies, property — and sort countable from exempt.
- Get the policy valued early: a settlement takes roughly 60 to 120 days, so start the review before the nursing home bills become urgent.
- Establish the Miller Trust if income exceeds the cap.
- Spend down on permitted items: care costs, the home (within limits), a vehicle, burial arrangements, debts.
- File the application once the countable column is at or under $2,000, with five years of clean records ready.
An elder law attorney should quarterback the sequence — a misstep on timing or documentation can cost months of coverage. The settlement piece can run in parallel; a free policy review starting from just the policy’s cover page tells you early whether the policy is a meaningful asset or a lapse candidate.
Where to Verify the Current Texas Figures
Every dollar figure in this guide adjusts periodically: the asset limit, the special income limit, the CSRA, and the home equity cap. Texas Health and Human Services publishes the current numbers, and the Texas Department of Insurance can help with insurance-side questions — its consumer tools are covered in our guide to TDI consumer resources. The tax side of selling a policy — favorable in Texas, which has no state income tax — is covered in life settlement taxes in Texas.
Pine Lake Life Solutions offers a free policy review for families weighing the insurance piece of a spend-down: send the policy cover page and we will tell you what the market might pay. Call (305) 209-7183, or start with the Education Center. This guide describes program rules for education; eligibility decisions belong with Texas HHS and your elder law attorney.
Frequently Asked Questions
What is the Medicaid asset limit in Texas for 2026?
A single long-term-care applicant can generally keep about $2,000 in countable assets, with the homestead, one vehicle, and certain other items exempt. Verify the current figure with Texas Health and Human Services, since limits adjust periodically.
What does it mean that Texas is an income-cap state?
Texas sets a hard special income limit — about $2,901 per month using the 2025 federal figure — rather than letting medical bills offset excess income. Applicants over the cap must route income through a Miller Trust, also called a Qualified Income Trust, to qualify. The trust must be drafted properly and funded monthly.
Does my life insurance count against the Texas asset limit?
Usually, yes, if it has cash value. Term coverage with no cash value is generally not counted, and small policies under a modest face-value exemption may be excluded, but cash value above the exemption is a countable asset that can put you over the $2,000 limit.
Is selling my policy before applying for Medicaid a gifting violation?
No — a sale at fair market value is not a gift. The five-year lookback penalizes transfers for less than fair value, not market-price sales. A life settlement converts the policy into cash, which you then spend down on care and other permitted items before applying.
How much can the healthy spouse keep in Texas?
Under federal spousal impoverishment rules, the community spouse can retain a resource allowance of up to roughly $157,920 (the 2025 federal maximum — verify the 2026 figure), plus the home within equity limits, a vehicle, and their own income. An income allowance can also shift funds to a low-income community spouse.
How much more than surrender value could a settlement pay?
The federal GAO’s market study found sellers typically received about 10% to 35% of the policy’s face value — on average roughly 4 to 8 times the cash surrender value. Actual offers depend on age, health, premiums, and policy type, which is why a free policy review is the practical first step.
How long does a life settlement take, and is that fast enough for a Medicaid timeline?
Typically 60 to 120 days from application to funding. That usually fits a planned spend-down if you start early, but it is tight in a crisis. If a nursing home admission is imminent, begin the policy review immediately and coordinate the sequence with an elder law attorney.
Do I need an elder law attorney to apply for Texas Medicaid?
It is not legally required, but Texas’s income-cap and Miller Trust requirements make professional help especially valuable here. A drafting or timing error on the trust can delay eligibility for months. This guide is educational; eligibility decisions rest with Texas HHS.
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Related Reading
- Life Settlement Vs Surrender
- What Policies Qualify For Life Settlement
- Cash Surrender Value Life Insurance
- Life Settlement Taxes Texas
- Texas Insurance Department Consumer Help
- How It Works Policy Options
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.