Nursing home care in New York costs between $14,000 and $20,000 per month. For most families, that number is impossible to sustain for any meaningful length of time. Medicaid — the joint federal-state program that pays for long-term care — exists precisely because private savings simply aren't enough. But Medicaid doesn't help you until you've spent most of what you have. That's the spend-down.

I have this conversation in my office almost every week. A family from the Bronx or Queens calls because their mother just got a diagnosis. She has a home, some savings, maybe a small IRA. They want to know: does she have to lose everything to qualify for Medicaid? The answer is no — but only if they plan carefully and legally.

New York's Medicaid rules are among the most complex in the country. But they also provide more legitimate planning opportunities than most states offer. This guide explains how spend-down works, what's protected, and what legal strategies New York families can use to preserve assets while still qualifying for benefits.

What Is the Medicaid Spend-Down?

Medicaid is a means-tested program. To qualify for nursing home Medicaid in New York, you must have countable assets below a threshold set by the state. If you have more than that threshold, you're required to spend down — use your excess assets to pay for care — until you reach the limit. At that point, Medicaid begins paying.

The spend-down concept sounds simple. In practice, it's full of complexity: which assets count, which don't, how income interacts with the asset test, what transfers trigger penalties, and what legitimate strategies are available to minimize what you lose. Getting it wrong costs families hundreds of thousands of dollars. Getting it right — with proper planning — preserves a meaningful inheritance for children and spouses.

2026 Medicaid Asset Limits in New York

New York's Medicaid asset limits for nursing home (institutional) Medicaid are updated periodically. For 2026, the countable asset limits are:

Applicant Status Countable Asset Limit
Single applicant $30,182
Married couple (both applying) $30,182 (combined)
Married couple — community spouse resource allowance (CSRA) Up to $154,140 for the at-home spouse (minimum $30,182)

The Community Spouse Resource Allowance (CSRA) is a critical protection for married couples. When one spouse enters a nursing home, New York does not require the at-home ("community") spouse to spend down all their assets. The community spouse can keep up to $154,140 in countable assets in 2026. Assets above that figure are counted toward the nursing home spouse's eligibility calculation. This protection prevents the "at-home spouse impoverishment" scenario that Medicaid's rules are specifically designed to avoid.

Important: These are the limits for institutional Medicaid (nursing home care). Home and community-based Medicaid programs in New York may have different income and asset rules. Community Medicaid — which covers home care — does not currently have an asset test for most applicants in New York, though this is subject to ongoing policy changes.

Countable vs. Exempt Assets: What Medicaid Looks At

Not everything you own counts toward the Medicaid asset limit. New York Medicaid divides assets into two categories: countable assets (which must be spent down) and exempt assets (which are protected and don't affect eligibility). Understanding this distinction is the starting point for any Medicaid planning conversation.

Countable Assets (Must Be Spent Down)

Exempt Assets (Protected)

The primary home's exempt status is especially important for New York families. A home in Brooklyn, Queens, or the Bronx can easily be worth $700,000 to $1.5 million. For a married couple, the home stays fully protected regardless of value while either spouse is alive. For a single applicant, the home is protected during their lifetime — but Medicaid will seek recovery from the estate afterward unless planning is in place.

The 60-Month Lookback Period

You can't simply give away your assets the week before applying for nursing home Medicaid. New York — like all states — applies a 60-month (5-year) lookback period for institutional Medicaid. Any asset transferred for less than fair market value during the 60 months before application is subject to a penalty period during which Medicaid will not pay for nursing home care.

The penalty period is calculated by dividing the total value of disqualifying transfers by the average monthly nursing home cost in New York (the "regional rate"). In 2026, that rate is approximately $14,706 per month in the New York City region. So if you gave away $147,060 within the lookback window, you'd face roughly a 10-month penalty period — during which you'd be responsible for paying your own nursing home costs even if you had no assets left.

This is why last-minute planning is dangerous. Families who come to me after a parent is already in a nursing home have far fewer options than families who started planning 5+ years in advance. Our guide on the New York Medicaid lookback period covers this in much more detail.

Important 2026 note: New York recently implemented a lookback period for Community Medicaid (home care) programs as well. The community Medicaid lookback is 30 months, phased in over time. If you receive home care through a Medicaid waiver program, transfers made in the 30 months before application will be scrutinized. This is a significant change from prior law and affects planning timelines considerably.

Legal Spend-Down Strategies

Spend-down doesn't have to mean writing checks to the nursing home until you're broke. New York Medicaid law permits a range of legitimate strategies to convert countable assets into protected ones or to spend excess assets in ways that benefit the family rather than disappearing into institutional care costs.

Strategy 1: Pooled Income Trusts

A pooled income trust (sometimes called a supplemental needs trust) is a special trust authorized under New York Social Services Law Section 366. It's managed by a nonprofit organization rather than a family member. Here's how it works in the Medicaid context:

In New York, Medicaid applicants in nursing facilities must contribute most of their monthly income — Social Security, pension, annuity payments — toward the cost of their care. The only income they keep is a $50/month "personal needs allowance." A pooled income trust allows a Medicaid recipient to deposit income into the trust each month rather than paying it toward nursing home costs. The trust then pays for services and expenses that Medicaid doesn't cover: medications not covered by the formulary, clothing, cable TV, phone service, haircuts, certain home improvements — anything that supplements but doesn't duplicate Medicaid-covered services.

Pooled income trusts are most commonly used in the context of community Medicaid (home care) rather than nursing facility care, but they're an important tool in the overall planning picture. A small percentage of the trust funds go to the nonprofit upon the beneficiary's death; the remainder can be retained for the beneficiary's estate or heirs.

Strategy 2: Medicaid Asset Protection Trust (MAPT)

A Medicaid Asset Protection Trust — a type of irrevocable trust specifically designed to shelter assets from Medicaid spend-down — is the most commonly used planning tool for people who have time to plan ahead. You transfer assets into the trust more than 60 months before applying for Medicaid. After the lookback period expires, those assets are no longer counted for Medicaid eligibility purposes.

The critical rules: you cannot be the beneficiary of principal from a MAPT. You give up access to the principal of the trust. You can, however, retain an income interest, retain rights to live in any home transferred to the trust, and designate your children or other family members as beneficiaries. The trust is irrevocable — you can't take the assets back.

For a family where mom has a $600,000 home in Staten Island and $200,000 in savings, a MAPT funded 5+ years in advance can protect most of that wealth from Medicaid spend-down. This strategy requires long lead time, which is why starting early matters so much. Our Medicaid planning guide explains this strategy in depth.

Strategy 3: Caretaker Child Agreements and Transfers

Normally, transferring your home to your child within the Medicaid lookback period triggers a penalty. But there's an important exception: the caretaker child exemption. Under federal and New York Medicaid rules, a home can be transferred to an adult child who:

This transfer is exempt from the lookback penalty entirely. The child must document the care they provided — it's not enough to simply live there. Medical records showing the parent's care needs, statements from healthcare providers, and records of the child's caregiving activities all help establish the exemption.

A related strategy is the personal care agreement (sometimes called a caregiver agreement). A parent can legally pay a child — or another person — fair market value for legitimate caregiving services. These payments reduce the countable estate naturally and compensate a family caregiver who is doing real, documented work. The agreement must be in writing, must specify services to be rendered, must pay at a rate consistent with what commercial caregivers charge (roughly $18–$25 per hour in New York City for non-licensed home care), and the services must actually be rendered. Retroactive payments for past care are not permitted.

Strategy 4: Pre-Paid Funeral and Burial Arrangements

This one sounds morbid, but it's practical. An irrevocable pre-paid funeral contract — where you pay in advance for your funeral and burial costs — is completely exempt from Medicaid's asset calculation. For a single applicant trying to spend down $30,000 in countable assets, purchasing a $15,000 to $20,000 pre-paid funeral arrangement immediately removes that amount from the countable estate. Many funeral homes in the New York area offer these contracts directly.

The "irrevocable" part matters. A revocable pre-paid funeral contract can still be canceled and the money refunded — which means Medicaid counts it as a countable asset. It must be irrevocable to be exempt.

Strategy 5: Home Modifications and Exempt Purchases

Spending excess countable assets on legitimate, useful purposes that benefit the applicant is a valid spend-down strategy. Common examples include:

These purchases must be genuine — Medicaid will scrutinize unusual expenditures. Purchasing a luxury car you don't need or furniture you'll never use is not the intent. But legitimate needs that happen to reduce countable assets are entirely acceptable.

Strategy 6: Medicaid-Compliant Annuities

A Medicaid-compliant annuity converts a countable asset (lump sum) into a non-countable income stream. It must meet strict federal requirements: it must be irrevocable and non-assignable, actuarially sound (payments must be completed within the applicant's actuarial life expectancy), and name New York State as a remainder beneficiary in an amount up to what Medicaid paid in benefits.

Medicaid annuities are most useful for married couples. When one spouse applies for nursing home Medicaid and the couple has assets exceeding the CSRA, those excess assets can be converted to an annuity that pays income to the community spouse. The community spouse's income doesn't affect the nursing home spouse's Medicaid eligibility. This strategy is highly technical and must be structured correctly — errors can create penalties rather than savings.

Income Rules: The Patient Pay Amount

Asset eligibility is only half the picture. Medicaid also has income rules for nursing facility care. Unlike assets (where you keep up to the limit), most of your income must go toward your "patient pay amount" — the portion of nursing home costs you're required to contribute. Medicaid pays the balance.

For a single Medicaid recipient in a New York nursing home in 2026, the income calculation works roughly like this:

For married couples, the at-home spouse may be entitled to a portion of the nursing home spouse's income to ensure they're not left impoverished. New York's Minimum Monthly Maintenance Needs Allowance (MMMNA) sets a floor on the income the community spouse can retain.

Medicaid Estate Recovery: The Home After Death

Even if the primary home is exempt during a Medicaid recipient's lifetime, New York has an estate recovery program. After the recipient dies, the state can make a claim against their estate — including the home — to recover what Medicaid paid in benefits. This is called Medicaid estate recovery, and it's real.

Recovery is limited to the probate estate — assets that pass through the will and Surrogate's Court. It does not reach assets in a properly structured irrevocable trust, jointly held property that passes by operation of law, assets with beneficiary designations that avoid probate, or property held in a trust where the Medicaid recipient was not the owner.

There are also exceptions: estate recovery is deferred (not pursued) while a surviving spouse, minor child, or blind or disabled child of any age is still living in the home. But eventually, if the home passes through probate, the state can recover. This is why asset protection trusts, life estates, and other probate avoidance strategies matter so much in Medicaid planning.

What About the 2026 Changes to Community Medicaid?

New York's Community Medicaid program — which covers home care, adult day programs, and other non-institutional services — has historically been easier to qualify for than nursing home Medicaid. It had no asset lookback period. That changed. New York now applies a 30-month lookback period to Community Medicaid MLTC (Managed Long-Term Care) programs. Transfers of assets within 30 months of a Community Medicaid application may trigger a penalty period.

This change significantly shortened the planning window for families who want to receive home care while qualifying for Medicaid. If your parent is currently receiving home care and you're thinking about Medicaid planning, act now — not in two years. Our asset protection guide and our Medicaid eligibility overview cover these changes in more detail.

Don't Spend Down to Zero When You Don't Have To

New York Medicaid law has protections for families who plan ahead. Morgan Legal Group has helped hundreds of New York families preserve assets while qualifying for the long-term care coverage they need. Call us before a crisis forces your hand.

Schedule a Medicaid Planning Consultation

The Right Time to Start Medicaid Planning

There is no "too early" for Medicaid planning. The 60-month lookback for nursing home Medicaid and the 30-month lookback for Community Medicaid mean that the optimal strategies — primarily the Medicaid Asset Protection Trust — require starting at least 5 years before you expect to need care. For most people, that means planning in their late 60s or early 70s, well before any diagnosis or significant health decline.

Crisis planning — planning after a nursing home admission is already needed — is still possible. But the options are far more limited. At that stage, we're typically looking at personal care agreements, annuity conversions, spend-down on exempt assets, and half-a-loaf strategies (where you gift a portion of assets, accept a partial penalty period, and use the retained assets to cover that penalty). These are better than nothing, but they're a fraction as effective as planning done years in advance.

The families I've seen protected most completely from Medicaid spend-down are the ones who came in for a planning meeting when mom was 68 and healthy. The ones who called in a panic when she was already in a facility were working with far fewer tools. Visit morganlegalny.com/medicaid-planning to learn more about our approach to Medicaid planning for New York families.

How Morgan Legal Group Helps

Medicaid planning is one of the most technically complex areas of elder law. It involves federal law, New York State regulations, individual county Medicaid department policies, and planning strategies that must be implemented in exactly the right way at exactly the right time. A mistake — an improperly funded trust, a transfer without adequate documentation, an annuity that doesn't comply with state requirements — can cost a family far more than the attorney's fee they were trying to avoid.

At Morgan Legal Group, P.C., we specialize in elder law and Medicaid planning for New York families. Attorney Russel Morgan, Esq. and our team work with families throughout New York City and the surrounding area to develop and implement comprehensive Medicaid plans that protect what clients have worked a lifetime to build. We coordinate the full picture: the trust, the spend-down strategy, the Medicaid application itself, and the estate recovery protection after death.

Call us at (212) 561-4299 or visit 15 Maiden Lane, Suite 905, New York, NY 10038. The earlier you call, the more we can protect.