When Selling Assets Helps—and When It Hurts—Your Medicaid Spend-Down Strategy

As the cost of long-term care continues to rise, many families turn to their assets for relief—selling property, vehicles, or investments to pay for nursing homes, in-home care, or assisted living. It’s a practical response. But when Medicaid is part of the plan, selling too quickly—or without proper guidance—can lead to unexpected financial setbacks.

We often hear from Michigan families who believed they were making a wise financial decision, only to learn that Medicaid either counted the sale proceeds against them or imposed a penalty because they sold property for less than fair market value. These situations don’t just delay access to care—they create significant stress for loved ones who are trying their best to do the right thing.

That’s why understanding how Medicaid treats asset sales is essential to building an effective spend-down strategy.

What Medicaid Looks At

Medicaid has strict income and asset limits. When you sell something—whether it’s a vacation home, a boat, or an old investment account—the cash you receive is treated as a countable resource. If those proceeds push your total assets above Medicaid’s allowed limit, you may be disqualified until that money is spent in an approved way.

Selling for less than fair market value is even riskier. For example, if you transfer a family cottage to your daughter for $10,000 when it’s really worth $100,000, Medicaid treats the $90,000 difference as a “gift.” That amount can trigger a penalty period—months (or even years) during which you’re ineligible for Medicaid benefits.

When Selling Can Actually Help

Selling isn’t always a bad idea—it just needs to be done with strategy. Under the right circumstances, selling assets can support a legal and effective spend-down plan by allowing you to:

• Pay off debts like credit cards or loans
  
• Fund exempt purchases (home improvements, medical devices, or even a new vehicle for a spouse still at home)
• Convert non-exempt assets into exempt assets, so they no longer count against Medicaid limits.

These actions can help preserve your quality of life and protect a spouse or dependent while maintaining your path to Medicaid eligibility.

Don’t Guess—Plan

Every Medicaid application in Michigan is subject to a 5-year look-back period, meaning the state will review your financial history for the last five years. If they find transactions that violate the rules—even unintentionally—it could jeopardize your care when you need it most.

That’s why these decisions should never be made in isolation. With the proper planning, asset sales can be a smart part of your strategy—not a source of regret.

Let’s Plan the Right Way—Together

Our team at Rutkowski Law Firm helps Michigan families navigate Medicaid’s complex landscape every day. We can help you understand your current situation, avoid penalties, and protect your family’s financial future—whether you’re planning or responding to an immediate need.