How to Plan for Medicaid Eligibility in Michigan

Most people will require long-term care at some point in their lives, and they may have difficulty paying for it out of pocket. Medicaid can play a critical role in providing you with the financial assistance you need to offset the costs of nursing home care or home health services. However, there are strict criteria for Medicaid eligibility. It’s vital to plan well in advance to help ensure you qualify for benefits, while protecting your assets and financial security.   

What is Medicaid Planning?

Medicaid planning refers to the proactive process of arranging your assets in a manner to ensure you will qualify for Medicaid benefits when you need them. It involves using various financial tools and strategies to reduce your countable resources in order to meet the program’s income limits. Planning techniques can include the use of trusts, annuities, asset spend-down methods, and transfers made outside the look-back period. 

Strategies to Plan for Medicaid Eligibility

Medicaid planning can ensure you have access to quality healthcare while safeguarding your assets for your loved ones. Without a proper plan in place, your assets could potentially be depleted in the event you need to go into a nursing home, rather than be distributed to your loved ones when you pass away. While Medicaid has very strict income limits to qualify for benefits, certain strategies can be used to reduce your countable assets so that you can receive the long-term care you need.   

Some common strategies used to plan for Medicaid eligibility include the following: 

• Spending down — With a Medicaid spend-down, you use any funds that exceed Medicaid’s eligibility limits on various expenses, such as home care, medical bills, nursing home care, and healthcare costs. Once you reach the asset limit, you may qualify for Medicaid benefits. In Michigan, the asset limit for a single applicant is $9,660 (2025), but certain assets are exempt, such as a primary residence (with equity up to $730,000 in 2024), one vehicle, and personal belongings.
• Asset transfers — Asset transfers can be made strategically to help you qualify for Medicaid. However, any asset transfers must be made carefully and take the Medicaid look-back period into consideration. In Michigan, the look-back period is 60 months (5 years). Certain transfers are exempt from the look-back period, such as asset transfers to a spouse, a home transfer to a disabled child, and certain transfers made to a caretaker child. Transfers to a “sole benefit trust” for a disabled child or spouse are also permitted.
• Medicaid Asset Protection Trusts (MAPT) — A MAPT is a type of irrevocable trust that safeguards your assets and prevents them from being used to pay for long-term care. However, because transfers made into the trust are considered a gift, they need to be made more than five years before you will need Medicaid benefits to avoid triggering the look-back period penalty. MAPTs are recognized in Michigan but must be carefully drafted to comply with state and federal law.
• Income planning with annuities — Purchasing a Medicaid Compliant Annuity is a method that can be used to spend down your assets without impacting the look-back period. The annuity is purchased with a lump sum, which reduces your countable assets since Medicaid does not consider the annuity itself an asset. The assets are converted into a monthly income stream, which is not subject to Medicaid’s asset threshold. In Michigan, the annuity must be irrevocable, non-assignable, actuarially sound, and name the State of Michigan as the primary beneficiary up to the amount of Medicaid benefits paid.
• Community Spouse Resource Allowance (CSRA) and Spousal Income Allowance — For married couples, the “community spouse” (the spouse not in care) is allowed to retain a certain amount of assets (up to a maximum of $157,920 in 2025) and may be entitled to a portion of the institutionalized spouse’s income. Proper planning can maximize these allowances.
• Lady Bird Deeds (Enhanced Life Estate Deeds) — Michigan recognizes Lady Bird Deeds, which allow a home to pass outside of probate and avoid estate recovery, while retaining the home as an exempt asset for Medicaid eligibility.
• Special Needs Trusts and Pooled Trusts — For disabled individuals under age 65, a first-party special needs trust (also called a “Medicaid payback trust”) can be used to shelter assets without affecting eligibility. Pooled trusts are also available regardless of age.
• Gifting and Controlled Gifting Plans — While outright gifts within the look-back period create a penalty, controlled gifting strategies (such as “half-a-loaf” gifting) may be used in crisis planning, though these are complex and require careful calculation of penalty periods.
• Long-term care insurance — Long-term care insurance may be part of a Medicaid eligibility strategy. It can be used to cover the costs of long-term care services before you have spent down your income to the level required for Medicaid eligibility. It may also cover certain expenses that Medicaid does not.

In addition, long-term care insurance may be part of a Medicaid eligibility strategy. It can be used to cover the costs of long-term care services before you have spent down your income to the level required for Medicaid eligibility. It may also cover certain expenses that Medicaid does not. 

Understanding the Medicaid Lookback Period

When planning for Medicaid eligibility, it’s essential to be aware that there is a 60-month look-back period. This period is meant to prevent individuals from transferring assets just before submitting their Medicaid application to qualify for benefits. Any assets transferred during this time frame will be reviewed and scrutinized by Medicaid. 

If Medicaid determines that transfers were made for less than fair market value within five years before the date you applied for the program, a penalty period may apply — and you would be ineligible to receive Medicaid benefits during that time. The length of the penalty period is calculated by dividing the total value of ineligible transfers by the state’s penalty divisor. As of 2025, the Michigan penalty divisor is $11,842 per month.

Estate Recovery in Michigan

Michigan has an estate recovery program, which allows the state to seek reimbursement for Medicaid benefits paid after the recipient’s death. However, estate recovery is limited to assets that pass-through probate. Proper planning, such as using Lady Bird Deeds or beneficiary designations, can help avoid estate recovery.

Contact an Experienced Michigan Medicaid Planning Attorney

Medicaid planning is complex, and even just a minor error can impact your eligibility. It’s critical to have a knowledgeable Medicaid planning attorney by your side who can help you navigate the process. To learn more about Medicaid planning strategies, contact us today. Our team of attorneys is dedicated to guiding individuals and families through the Medicaid planning process and offering the legal assistance they need.