Southern Illinois Medicaid Planning Attorneys

When you apply for Medicaid long-term care in Illinois, the state reviews the past 60 months (five years) of your finances. Any asset you gave away or sold for less than fair market value during that window can trigger a penalty period of Medicaid ineligibility. The rule comes from federal law at 42 U.S.C. § 1396p(c).

The look-back starts on the date you apply and counts back five years. Transfers made before that window are not reviewed. The purpose of the rule is to stop people from giving everything away the month before they need care, but it sweeps in ordinary gifts too. Helping a grandchild with college, giving money at a wedding, or adding a child’s name to a deed can all count as transfers if they happened inside the five-year window.

This is the reason planning early matters so much. A transfer made more than five years before you need care is completely outside the look-back and carries no penalty.

Illinois calculates the penalty by dividing the total amount you transferred for less than fair market value by the average monthly private-pay cost of the nursing home you intend to enter. The result is the number of months Medicaid will not pay for your care. There is no maximum penalty, and you pay out of pocket during it.

Unlike many states, Illinois does not use a single statewide divisor. It uses the private-pay rate of the specific facility involved, so the penalty length can vary from one nursing home to another. As an illustration, a $90,000 gift divided by a $9,000 monthly rate would create a 10-month penalty. The penalty does not begin when you make the gift. It begins when you are otherwise eligible for Medicaid and in a nursing home, which is often the worst possible time to be without coverage. The Illinois rules are explained by Illinois Legal Aid Online.

Transferring your home to your children to protect it is one of the most common and most costly mistakes families make. An outright gift of the house starts the five-year clock, can create a large penalty period if care is needed sooner, strips away your property tax breaks, and hands your children a capital gains tax problem they would not have if they inherited the home instead.

When you give your home away during life, your children take your original cost basis. If they later sell it, they may owe capital gains tax on decades of appreciation. If they had inherited the home instead, they would receive a stepped-up basis and likely owe little or nothing. An outright gift also exposes the home to your children’s creditors, divorces, and lawsuits. There are sound ways to protect a home, but a casual transfer to the kids is rarely one of them. The right tool depends on your timeline and your goals, which is exactly what a planning consultation sorts out.

Federal and Illinois law allow several transfers that never trigger a penalty. These include transfers to a spouse, to a blind or disabled child, to a trust for the sole benefit of a disabled person under 65, and two home-specific exceptions: the caretaker child exception and the sibling-with-an-equity-interest exception.

The caretaker child exception lets you transfer your home, penalty-free, to an adult child who lived with you for at least two years and provided care that kept you out of a nursing home during that time. The sibling exception allows a penalty-free transfer of the home to a sibling who has an ownership interest in it and lived there for at least one year before you entered care. These exceptions are powerful but fact-specific, and they require documentation. Getting them right is one of the clearest reasons to involve an attorney before any transfer is made.

An asset spend-down means lawfully reducing your countable assets to the Medicaid limit before applying. The key is that you do not have to waste the money. You can spend it on things that benefit you and your family, and you can convert countable assets into exempt ones, rather than simply handing it to the nursing home.

Legitimate spend-down steps include paying off a mortgage or other debt, making repairs or accessibility improvements to your home, buying a more reliable vehicle, prepaying an irrevocable funeral, and purchasing exempt assets. Each of these reduces countable assets without violating the transfer rules, because you are receiving fair value in return rather than giving anything away. Done correctly, an asset spend-down preserves far more for the family than the “spend it all on care” approach most people assume is required.

Because Illinois is a spend-down state, having income above the monthly standard does not end your eligibility. Instead, a nursing home resident contributes nearly all monthly income toward the cost of care, keeping a small personal needs allowance and, if married, a portion for the spouse at home. Medicaid then pays the remaining cost.

For a nursing home resident, this contribution is sometimes called the patient pay amount. The resident keeps a $60 monthly personal needs allowance, health insurance premiums are deducted, and a community spouse may receive an income allowance. For people receiving care at home or in the community rather than in a facility, Illinois uses a monthly medical spend-down, where you become eligible in any month your medical expenses bring your countable income down to the standard. We help families map this out so there are no surprises about who pays what each month.

After a person who received Medicaid long-term care dies, federal law requires Illinois to seek repayment from their estate. Under 305 ILCS 5/5-13, Illinois recovers only from the probate estate, meaning the property that passes under a will or by intestacy. The home is the most common target, because it is usually what is left.

This is the key to protecting a home. Because recovery reaches only the probate estate in the typical case, property that passes outside probate, such as a home held in joint tenancy, transferred by a Transfer on Death Instrument, or held in a living trust, is generally beyond its reach. One narrow exception applies: for a person who received benefits under a long-term care Partnership insurance policy, Illinois law extends recovery to those non-probate transfers. Several limits also apply. Recovery is deferred while a surviving spouse, a child under 21, or a blind or disabled child is living. It is waived for estates worth $25,000 or less. It cannot be enforced against the home while a surviving spouse or dependent lives there. And under Public Act 102-1037, effective June 2, 2022, Illinois no longer files new liens on real property. The state explains the program on the HFS estate recovery page.

For most families the goal is simply to keep the home out of probate, since Illinois recovers only from the probate estate. A Transfer on Death Instrument (TODI) does this with the least downside: it avoids probate and estate recovery, does not start the five-year look-back, and lets you keep full control of the home while you are alive.

The key difference among the tools is timing. A TODI is a death-only instrument. It transfers nothing while you are alive, so the home stays fully yours, you can sell, refinance, or change the beneficiary at any time, and your children’s creditors and divorces cannot reach it because they own nothing yet. It keeps the home out of probate, and therefore out of estate recovery, only at your death. For the goal most clients have, protecting the home from recovery after they are gone, that is usually all that is needed. Illinois does not recognize the “Lady Bird” deeds used in some other states, so the TODI is the death-only deed tool here.

A life estate deed and an irrevocable trust do something a TODI does not: they move value out of your hands during your life. With a life estate, you keep the right to live in the home but deed the future interest to your children now. The transfer starts the look-back, but once five years pass it no longer carries a penalty, and the remainder interest belongs to your children rather than to you. So if the home is sold during your life, their share of the proceeds is protected rather than counted as your asset. That during-life protection is the life estate’s one real Medicaid advantage over a TODI. The cost is high: you can no longer sell or refinance without your children’s signatures, and their share is exposed to their creditors, divorces, and judgments the moment the deed records.

An irrevocable trust reaches the same goal of moving assets out of your hands now, but without those drawbacks, using a trustee instead of co-owners, shielding the home from your children’s problems, and still letting you keep occupancy and income. On taxes, a TODI and a reserved life estate come out the same: both keep the home in your taxable estate at death, so your heirs receive the full stepped-up basis. Only an outright lifetime gift forfeits that. A deed of any kind does nothing for countable assets like bank accounts and investments, which is where the strategies below come in.

A Medicaid Asset Protection Trust is an irrevocable trust that holds assets, often the home, outside your countable estate. Assets placed in it more than five years before you apply are fully protected from both the asset limit and, in most cases, estate recovery. It is the cornerstone of advance planning.

Because the trust is irrevocable, you give up direct control of the assets you place in it, though the trust can be structured so you keep the right to live in your home and receive trust income. The five-year look-back applies to the transfer into the trust, which is why this tool works best when you plan ahead rather than wait for a crisis. For the home by itself, the simpler deed tools above can keep it out of estate recovery. The trust’s added value is protecting countable assets such as cash and investments, keeping everything outside your estate, and controlling how and when your beneficiaries receive it.

When one spouse needs care and the other remains at home, federal spousal impoverishment rules let the at-home spouse keep a meaningful share of the couple’s assets and income. In Illinois for 2026, the community spouse can keep up to $143,172 in countable resources and receive a monthly income allowance of up to $4,066.50.

Transfers between spouses never trigger a penalty, which opens up planning options that are not available to single applicants. The amount the community spouse can keep is set at the time of application and is not reduced later if the standard changes. These figures come from the federal spousal impoverishment statute, 42 U.S.C. § 1396r-5, as applied by Illinois. We cover the details in the spouse section below.

A Medicaid-compliant annuity converts a lump sum of countable assets into a stream of income, which can be especially useful in crisis planning for a married couple. To be compliant, the annuity must be irrevocable, non-assignable, actuarially sound, and name the State of Illinois as a remainder beneficiary. A properly structured promissory note can work similarly.

These tools are technical, and the rules are unforgiving. An annuity that misses a single requirement can be treated as a countable asset or a penalized transfer, undoing the plan. This is not do-it-yourself territory. When used correctly, though, these strategies can preserve significant assets even after a sudden need for care.

A written caregiver agreement lets a family member be paid a fair, documented wage for care they provide, turning what would otherwise be a penalized gift into a legitimate expense. Other tools include long-term care insurance and Illinois Long-Term Care Partnership policies, special needs trusts for disabled beneficiaries, and pooled trusts.

The key to a caregiver agreement is that it must be in writing, signed before the care begins, and pay no more than a reasonable market rate, with records kept. Without those safeguards, the state can treat the payments as gifts. Each of these tools fits a particular situation, and part of our job is matching the right tool to your circumstances rather than forcing a one-size-fits-all plan.

Medicaid planning is the lawful arrangement of your assets and income, using trusts, deeds, spousal protections, and the timing rules built into the law, so you can qualify for Medicaid long-term care while protecting what the law allows for your family. It is legal in Illinois and uses the same statutes that create Medicaid’s rules. It is planning, not concealment.

The line is important. Using federal and state rules the way they are written is lawful. Hiding assets, lying on an application, or backdating a transfer is fraud. Good planning is built to be transparent and to hold up if the state reviews it.

Medicare is health insurance that pays for doctors, hospital stays, and short-term skilled rehabilitation, but it does not pay for long-term custodial nursing home care beyond a limited period. Medicaid is the only program that pays for ongoing long-term care, and qualifying for it without losing your savings is the goal of Medicaid planning.

Many families learn this distinction the hard way, after Medicare stops paying and the nursing home bill becomes their responsibility. Planning ahead avoids that surprise.

For 2026, a single applicant in Illinois can keep up to $17,500 in countable assets, well above the $2,000 limit used in most states. A married applicant’s spouse who stays home can keep up to $143,172 in addition to the exempt home and one vehicle. Exempt assets like your home and car do not count toward these limits.

Income is handled separately. Because Illinois is a spend-down state, income over the monthly standard does not end eligibility; it is managed through a monthly spend-down or, for a nursing home resident, a contribution toward the cost of care.

Exempt assets in Illinois generally include your primary home (with equity up to $752,000 if a spouse or dependent lives there or you intend to return), one vehicle, personal belongings and household goods, an irrevocable prepaid funeral and burial plot, and life insurance with little or no cash value. Exempt assets do not count toward the asset limit.

A core part of planning is lawfully converting countable assets, such as cash and investments, into exempt ones, so the family keeps more value rather than spending it all on care.

The look-back is a review of the past 60 months of your finances when you apply for Medicaid long-term care. Any asset given away or sold below fair market value during that window can create a penalty period of ineligibility. It comes from federal law at 42 U.S.C. § 1396p(c).

Transfers made more than five years before you apply are not reviewed, which is why early planning is so valuable. Ordinary gifts inside the window, such as helping a grandchild or adding a child to a deed, can count too.

You can, but it is usually a mistake. An outright gift of your home starts the five-year look-back, can create a large penalty if you need care sooner, costs your children a valuable tax break by losing the stepped-up basis, and exposes the home to their creditors and divorces. There are better tools to protect a home.

If your children inherit the home instead of receiving it as a gift, they get a stepped-up basis and likely owe little or no capital gains tax if they sell. An irrevocable trust or the right deed strategy usually protects the home far more effectively than a simple transfer to the kids.

Spend-down means reducing your assets or income to the Medicaid limit. An asset spend-down lawfully reduces countable assets, often by paying off debt, improving your home, or buying exempt assets rather than wasting money. An income spend-down lets you qualify despite income over the limit by contributing toward care or incurring medical expenses each month.

The key point is that a spend-down does not mean handing everything to the nursing home. Much of the money can be redirected to things that benefit you and your family, which is exactly where planning makes the difference.

Possibly, if you do nothing. Illinois must seek repayment of long-term care costs from a deceased recipient’s estate under 305 ILCS 5/5-13, but it recovers only from the probate estate. A home left in your sole name passes through probate and is exposed, while a home that passes outside probate, by a Transfer on Death Instrument, joint tenancy, or a living trust, is generally protected.

Illinois is not a general expanded-recovery state, so most non-probate transfers are beyond its reach. A narrow exception applies to people who used a long-term care Partnership insurance policy. Recovery is also deferred while a surviving spouse, a child under 21, or a disabled child is living, and new property liens have been restricted since June 2, 2022. The catch is the five-year look-back, which is why the simplest-looking fix is not always the right one. We help you pick the tool that protects the home without creating a penalty or a tax problem.

A Medicaid Asset Protection Trust is an irrevocable trust that holds assets, often your home, outside your countable estate. Assets placed in it more than five years before you apply are protected from the asset limit and, in most cases, from estate recovery. It works in Illinois and is especially valuable when you want to protect countable assets, not just the home, and keep them fully outside your estate.

Because the trust is irrevocable, you give up direct control, although it can be written so you keep the right to live in your home and receive income. The five-year look-back applies to funding the trust, so this strategy rewards planning ahead.

For 2026 in Illinois, the spouse who remains at home, the community spouse, can keep up to $143,172 in countable resources, plus the exempt home and one vehicle. If that spouse’s income is below $4,066.50 per month, income can be shifted from the spouse in care to reach that level. Transfers between spouses are never penalized.

These spousal impoverishment protections give married couples far more planning room than single applicants have. The protected amount is locked in at the time of application, so the timing and the numbers must be handled carefully from the start.

No. While advance planning offers the most options, meaningful protection is often still possible after care has begun. For a married couple, crisis planning can preserve a significant share of assets through spousal transfers, Medicaid-compliant annuities, and exempt-asset conversions. Even for a single person, doing nothing is almost never the best choice.

Before you spend down to nothing or sign documents a facility hands you, talk to an attorney. The difference between an informed crisis plan and no plan at all is often tens of thousands of dollars and the family home.