Michigan Medicaid Planning and Long-Term Care

Reviewed by Kelly M. Neumann, a Michigan-admitted attorney who handles the firm’s estate planning matters. Last updated July 28, 2026.

Few things unsettle a family more than watching a lifetime of savings disappear to the cost of nursing home care, and in Michigan that cost can run past ten thousand dollars a month. Our estate planning attorneys at Neumann Law Group help families use the law as it is written to preserve what they can while qualifying for the Medicaid coverage that pays for long-term care. The best results come from planning ahead, calmly and well before care is needed, though families who come to us in a crisis still have real options. For the wider plan this fits inside, our Michigan estate planning attorneys coordinate Medicaid planning with wills, trusts, and incapacity documents.

Why Do Michigan Families Need Long-Term Care Planning?

The starting point most families miss is that Medicare does not pay for long-term custodial care. Medicare covers limited skilled care after a qualifying hospital stay and then stops, which leaves ordinary long-term nursing home and memory care to be paid privately or through Medicaid. Private payment at Michigan rates can exhaust a couple’s savings in a year or two, so Medicaid becomes the practical payer for extended care, and the question turns from whether to plan into how.

Medicaid is a joint federal and state program, and in Michigan it is administered by MDHHS under both federal law and state policy. Long-term care Medicaid is needs-based, meaning an applicant must fall within strict limits on countable assets and income. Planning does not mean hiding money or gaming the system. It means arranging a family’s resources, in advance and within the rules, so that a healthy spouse is not impoverished and a modest estate is not entirely consumed before coverage begins.

The Five-Year Lookback and Transfer Penalties

Federal Medicaid law imposes a five-year lookback on transfers. When a person applies for long-term care Medicaid, MDHHS examines the previous sixty months of financial records for gifts or transfers made for less than fair market value. A disqualifying transfer creates a penalty period, calculated by dividing the transferred amount by a state-set figure, during which Medicaid will not pay for care. Transfers completed more than five years before the application fall outside the lookback and carry no penalty.

The lookback is the single most important reason Medicaid planning rewards early action. A gift to a child or a grandchild, an addition to a joint account, or a below-market sale of property can all count as a disqualifying transfer if it happened within the five years before an application, even when the family had no Medicaid purpose in mind. The penalty is measured from the transferred value, so a large lifetime gift can delay coverage for many months at exactly the moment care is needed.

Advance planning works with the lookback rather than against it. Assets moved into a properly structured irrevocable trust, or otherwise transferred, more than five years before an application are generally beyond the reach of the penalty. Crisis planning, done when a person is already entering care, is more limited, but experienced counsel can still use spousal transfers, exempt purchases, and other lawful strategies to preserve part of what a family has.

Protecting the Home and the Healthy Spouse

Michigan families rely on two protections most. The first concerns the home, which is often a family’s largest asset. The home is frequently exempt from being counted while the Medicaid recipient or their spouse lives there, so qualifying for care does not usually require selling it. The exposure comes later, through estate recovery, the process by which Michigan seeks repayment from a deceased recipient’s probate estate, the estate administered under Michigan’s Estates and Protected Individuals Code, MCL 700.1101 and following. Since estate recovery reaches only the probate estate, a planning tool that keeps the home out of probate, such as a Lady Bird deed, can under current practice keep it beyond recovery, which is why the choice of transfer method is central to protecting a family home.

The second protection is for the spouse who remains at home, called the community spouse. Federal spousal impoverishment rules exist so that one spouse’s need for care does not leave the other destitute. The community spouse is allowed to keep a share of the couple’s combined countable assets, known as the Community Spouse Resource Allowance, along with a minimum level of monthly income. The exact dollar amounts are set by MDHHS and adjusted every year, so a plan should always be built on the current year’s figures. Structuring a couple’s assets to make full use of these allowances is central to protecting the well spouse.

How Is Michigan Medicaid Eligibility Determined?

Medicaid long-term care eligibility in Michigan turns on three tests applied together: a medical test, an asset test, and an income test. The medical test asks whether the applicant needs the level of care Medicaid covers. The asset test measures countable resources against the program limit, separating exempt assets, such as the home in many cases, one vehicle, and personal belongings, from countable ones, such as bank accounts and investments. The income test measures monthly income against program rules, which in Michigan can involve income-cap requirements for certain programs.

The figures behind each test, the asset limit, the spousal allowances, and the transfer penalty divisor, are adjusted annually, which is why planning is never a one-time calculation from an outdated number. An application that looks impossible on last year’s figures can succeed once the current limits and the available exemptions and allowances are applied correctly.

The figures and rules change every year, so Medicaid planning is worth reviewing with current counsel rather than last year’s numbers. Neumann Law Group offers a free consultation, and our estate planning attorneys build long-term care plans for families across Grand Traverse County and the Northern Michigan region, and we can meet clients where they are when caregiving makes travel hard.

What Records Does a Medicaid Case Turn On?

Medicaid eligibility is proven with documents, and the burden of proof falls on the applicant. Since MDHHS reviews five years of history, the case is built from a deep financial record: five years of bank and investment statements, deeds and titles showing how property is held, records of any transfers or gifts and what was received in return, and proof of the value of exempt and countable assets. Where a transfer is questioned, the documentary explanation of it, a genuine sale, a repayment, an exempt transfer to a spouse or a disabled child, is what defeats a proposed penalty.

For married couples, the record also has to establish the couple’s combined resources as of the date care began, because that snapshot fixes the community spouse’s allowance. Trust documents, if a trust is part of the plan, are examined closely to confirm they were properly drafted and funded. Assembling this record accurately, and being able to explain every entry in it, is a large part of what an experienced Medicaid attorney does.

How Neumann Law Group Approaches Medicaid Planning

Our approach begins with where the family actually is, because advance planning and crisis planning call for different work. For families planning ahead, we look at the five-year horizon and use tools such as properly structured irrevocable trusts and Lady Bird deeds on the home so that, when care is eventually needed, the assets are already protected and the lookback has run. We coordinate this with the rest of the estate plan rather than treating it as a separate exercise, since a Medicaid trust interacts with the will, the durable power of attorney, and the beneficiary designations.

For families in a crisis, when a parent is entering a nursing home now, we focus on the strategies that still work at that stage, spousal transfers and allowances, exempt purchases, and correct handling of the application itself, to preserve what the law allows. We prepare and manage the MDHHS application so that documentation gaps do not cause a denial. From our Traverse City office we serve families across the Grand Traverse region, and because these clients are often caring for an ailing spouse or parent, the firm can meet with families where they are.

What to Do About Long-Term Care Planning

The most valuable step is also the simplest: start the conversation before a health crisis forces it, because time is the one resource the lookback rewards. Gather a clear picture of the family’s assets and how each is titled, since the plan depends on knowing what is countable and what is exempt. Locate the deed to the home and any existing trust or power of attorney, because those documents shape the options.

Do not start giving money to children or transferring property as a do-it-yourself Medicaid strategy, because an uninformed transfer can create the very penalty period the family is trying to avoid, and a gift made in the wrong way is hard to undo. Do not assume that needing care next month means nothing can be done, because crisis planning still preserves assets in many cases. Bring an honest inventory of the family’s finances to an attorney who can match a lawful strategy to the current year’s rules.

Neumann Law Group offers a free consultation to Michigan families facing the cost of long-term care, whether they are planning years ahead or responding to a parent entering care now. Our estate planning attorneys build Medicaid strategies around the current MDHHS rules, protect the home and the healthy spouse where the law allows, and can meet with families where they are when caregiving makes travel hard. Call (800) 525-6386 or reach us through our contact page to talk through your family’s situation.

Frequently Asked Questions About Medicaid Planning

How Do I Protect My Assets From Nursing Home Costs in Michigan?

Michigan families use tools such as properly structured irrevocable trusts, Lady Bird deeds on the home, and spousal protections to preserve assets while qualifying for Medicaid long-term care. The most protection is available when planning happens well before care is needed, because of the five-year lookback, but options exist even in a crisis.

What Is the Medicaid Five-Year Lookback in Michigan?

When a person applies for Medicaid long-term care, MDHHS reviews the previous five years of financial records. Gifts or transfers for less than fair value made in that window can create a penalty period, a stretch of time during which Medicaid will not pay for care. Transfers made more than five years before applying are not penalized.

Will Medicaid Take My House in Michigan?

The home is often exempt while a Medicaid recipient or their spouse lives in it, but after death Michigan may seek repayment through estate recovery against the probate estate. A Lady Bird deed can pass the home outside probate, which under current practice generally keeps it beyond the reach of estate recovery.

How Much Can the Healthy Spouse Keep?

When one spouse needs nursing home care and the other stays home, federal spousal impoverishment rules let the community spouse keep a share of the couple’s assets, called the Community Spouse Resource Allowance, plus a minimum monthly income. The exact figures are set by MDHHS and adjusted each year.

Does Medicare Pay for Nursing Home Care?

Medicare pays only for limited, short-term skilled care after a hospital stay, not for long-term custodial nursing home care. That gap is why Medicaid becomes the main payer for extended care, and why planning for Medicaid eligibility matters to so many Michigan families.

Related Estate Planning Services

• Adult guardianship and conservatorship may be needed when a loved one can no longer make decisions and no plan is in place.
• Asset protection planning addresses shielding a family’s property from creditors and care costs more broadly.
• Trust administration covers how a Medicaid or family trust is carried out once it is in place.
• Alzheimer’s and dementia planning combines long-term care planning with incapacity documents for progressive conditions.