Summary
At first glance, many small business owners appear unlikely to be eligible for Medicaid long-term care. Even if their business is part-time or low-volume, they may still own business assets that are worth more than $2,000, and that is the individual asset limit for Medicaid in most states in 2025. These business assets could include things like farm equipment, a store, land, auto tools, machinery, etc.
However, business and trade assets are exempt from the asset limit in certain situations, so some business owners will meet their asset limit. But even if the assets aren’t exempt and the owners don’t meet their limit, there are still Medicaid Planning strategies they can use to eventually get under their limit and qualify for the care they need.
Medicaid’s exemption rules for business and trade assets can vary by state. One of the most important differences is that some states require the Medicaid applicant/beneficiary or their spouse to be actively involved in the business operations in order for it to be exempt, and some states do not require this. With that in mind, business and trade assets can be exempt from Medicaid’s asset limit if they meet these requirements:
Applicants may be asked to prove the validity of their business or trade by supplying some or all of the following:
Business assets that are not currently in use can still be exempt from the asset limit, if they meet the requirements described above and they are expected to be used again within a reasonable amount of time, which is 12 months in most states. The reason the assets are not being used also matters in some states. In the states where it matters, the reason must be out of one’s control, such as due to an illness or injury, as opposed to by choice. In fact, some states will grant an additional 12-month grace period if the asset is unused due to a “disabling condition” like a stroke, heart attack or depression.
In order for these not-in-use business assets to be exempt, Medicaid agencies will usually require the following information – the date they were last used, why they’re not being used and when they are expected to be used again. Assets of seasonal businesses will remain exempt year-round in most states as long as the business is expected to resume when its “open season” returns, or within the state’s normal grace period.
Business assets that aren’t expected to be used again will count toward Medicaid’s asset limit.
As mentioned above, a key difference between states when it comes to business asset exemptions is whether or not they require the Medicaid applicant/beneficiary or their spouse to be actively participating in the business in order for its assets to be exempt. In states that do require active participation, seniors who are applying for Medicaid’s nursing home coverage cannot have exempt business assets because they cannot be active business participants while residing in a nursing home.
The exemption amount can also vary between states. In most states, the full value of qualified business assets will be exempt, but that’s not the case in all states. Illinois, for example, will only exempt up to $6,000 of an asset’s equity value, and it will only do that if the business generates a minimum of 6% of the asset’s equity value.
The grace period for business assets not in use can also change depending on the state. As mentioned, it’s 12 months in most states, and it can be increased to 24 months if the disuse is due to a “disabling condition.” But Texas is a significant exception because it does not set any time limit on business assets not in use. As long as they once met the requirements listed above and they are expected to be used again, they can be exempt, regardless of how long that have not been in use.
A senior’s asset limit can change depending on their marital status, their state of residence and the Medicaid long-term care program they’re applying for – Nursing Home Medicaid, Home and Community Based Services Waivers or Aged, Blind and Disabled (ABD) Medicaid, which can also be called regular or state Medicaid.
In most states in 2025, the asset limit for all three programs for an individual is $2,000, and for married couples with both spouses applying it’s a combined $3,000 or $4,000. For Nursing Home Medicaid and HCBS Waiver applicants with one spouse applying, the asset limit for the applicant spouse is $2,000 in most states in 2025, and the asset limit for the non-applicant spouse is $157,920, thanks to the Community Spouse Resource Allowance.
The differences between states can be dramatic, starting in California, where there is no asset limit for any Medicaid applicant. However, California still has a Medicaid Estate Recovery Program (like all states), which is required by law to try and collect reimbursement for care expenses paid by Medicaid through the estate of deceased beneficiaries. So, even though some assets can be protected from the asset limit, that doesn’t mean they are necessarily protected from estate recovery.
Other state variations include New York, where the asset limit for all three programs is $32,396 for an individual and $43,781 for a couple with both spouses applying, and Florida, where the individual asset limit for Nursing Home Medicaid and HCBS Waivers is $2,000, but it’s $5,000 for ABD Medicaid.
Most assets are counted toward these limits, but not all. In addition to qualifying business assets, a primary vehicle, personal items, clothes, furniture, appliances and, in most cases, a primary home can all be exempt from the asset limit.
Seniors who don’t meet the asset limit for any reason, including owning countable business assets, can still qualify by using Medicaid Planning techniques. They can “spend down” their assets on almost anything until they reach the asset limit, as long as they spend on themselves or their spouse. Spending on anyone else would be a violation of the Look-Back Period. In most states, the Look-Back Period is 60 months (five years), which means the state will look back into an applicant’s financial history for the 60 months prior to their application date to make sure they have not given away any assets or sold them at less than fair market value. If they have violated the Look-Back Period, their application will be denied and they will face a penalty period of ineligibility.
People often “spend down” by paying for care out-of-pocket, paying off debt, making home modifications for safety and accessibility, repairing vehicles, or simply taking a vacation. They should not purchase non-essential items that could count against the asset limit, such as a second vehicle, and they cannot spend on anyone else, as mentioned. This includes things like paying for a grandchild’s education, or giving an old car to the neighbor.
Seniors can also reduce their assets to gain eligibility by purchasing an Irrevocable Funeral Trust, which will cover their funeral and burial expenses and doesn’t count toward the asset limit. They could also buy a Medicaid Compliant Annuity, which is exempt from the asset limit but will provide monthly payments that will count toward the income limit. If they plan far enough in advance and have enough assets, they could use a Medicaid Asset Protection Trust.
These planning techniques can be complicated, and misusing them can lead to an applicant being denied and penalized with a period of ineligibility that could last months or years. Before using them we recommended consulting with our team of professionals. They will also know which business assets are exempt, how long they can be out of use and what Medicaid program is best for any situation.
Our team of Certified Medicaid Planners™ will help you navigate the difficult landscape of Medicaid for long-term care.
