Short answer: Spending down means reducing countable resources to the limit ($2,000 for a single person in 2026) by spending at fair market value, such as paying for care, paying debts, or buying excluded items like a prepaid funeral or home repairs. Giving money away or selling below value is a transfer that can cause a penalty.
Common fair-market-value ways to reduce countable resources:
- Paying the nursing facility privately until resources reach the limit.
- Paying off debts, including a mortgage on the home.
- Repairing or improving the excluded home, or replacing an old vehicle with one excluded vehicle.
- Buying an irrevocable prepaid funeral or burial space, or setting aside up to $1,500 in a designated burial fund.
What does not work: gifts to family or selling property for less than it is worth. To avoid a penalty on a below-value transfer, the family has to show the state it was meant to be at fair market value or was made exclusively for a reason other than qualifying for Medicaid, so keep receipts and bank records for every large withdrawal in the 60-month look-back.
For a married couple, the spouse at home keeps a protected share of the couple’s resources, so the spend-down target is different. Spend-down strategy is elder-law territory; refer the family to an attorney before money moves.