Understanding the Illinois Spousal Impoverishment Act: How Medicaid Protects the Healthy Spouse

One of the biggest fears married couples face when one spouse needs long-term nursing home care is the possibility of losing everything, they have worked a lifetime to build.

Many people believe that if one spouse enters a nursing home, the couple must spend nearly all of their savings before Medicaid will help pay for care. Fortunately, that isn’t always true.

Illinois has laws, based on federal Medicaid protections, designed to prevent the healthy spouse from becoming financially devastated when the other spouse requires long-term care. These protections are commonly known as the Spousal Impoverishment Act or spousal impoverishment protections.

Understanding these rules can make an enormous difference for Illinois families planning for long-term care.

What Is Spousal Impoverishment?

The purpose of the spousal impoverishment rules is simple:

To prevent the spouse who remains at home (the “community spouse”) from being left without sufficient income or assets after the other spouse qualifies for Medicaid-covered long-term care. Congress first adopted these protections through the Medicare Catastrophic Coverage Act of 1988, and Illinois has incorporated them into its Medicaid program.

Without these protections, many healthy spouses would be forced to exhaust nearly all of the couple’s savings simply because their husband or wife required nursing home care.

Who Do These Rules Apply To?

The protections generally apply when:

• One spouse requires long-term nursing home care or qualifies for certain home- and community-based Medicaid services.
• The other spouse continues living at home.

The spouse receiving long-term care is referred to as the institutionalized spouse.

The spouse remaining at home is known as the community spouse.

What Does the Law Protect?

The spousal impoverishment rules protect two important things:

1. Assets

Illinois allows the community spouse to keep a portion of the couple’s countable assets while the institutionalized spouse seeks Medicaid eligibility.

This protected amount is called the Community Spouse Resource Allowance (CSRA).

For 2026, Illinois permits the community spouse to retain up to $162,660 in countable resources, subject to the applicable Medicaid rules and the couple’s financial circumstances.

2. Income

The law also protects income.

If the community spouse’s own monthly income is below a specified threshold, part of the institutionalized spouse’s income may be allocated to the community spouse to help cover living expenses.

This is known as the Community Spouse Monthly Maintenance Needs Allowance (CSMNA).

For 2026, the protected monthly income amount is up to $4,066.50, depending on the family’s circumstances.

What Assets Are Counted?

Not every asset counts toward Medicaid eligibility.

Some assets are generally exempt, including:

• The primary residence (subject to applicable equity limits)
• One vehicle
• Personal belongings
• Household furnishings
• Certain prepaid burial arrangements

Other assets, such as bank accounts, investments, and some retirement assets may be countable, depending on how they are owned and applicable Medicaid rules.

Because the rules are complex, families should never assume an asset is either exempt or countable without first obtaining legal advice.

Does the Healthy Spouse Have to Spend Everything?

No.

This is one of the biggest misconceptions about Medicaid.

Many people believe the spouse remaining at home must become impoverished before the institutionalized spouse can qualify.

That simply is not what the law intends.

Instead, Illinois recognizes that the community spouse must continue paying for:

• Housing
• Utilities
• Food
• Transportation
• Insurance
• Medical expenses
• Everyday living costs

The purpose of the spousal impoverishment rules is to help ensure the spouse at home can continue living independently with reasonable financial security.

When Should Families Begin Planning?

The best time to discuss long-term care planning is before a crisis occurs.

Unfortunately, many families wait until:

• A spouse is hospitalized.
• Someone receives a dementia diagnosis.
• Nursing home admission becomes unavoidable.
• A rehabilitation stay turns into permanent care.

By that point, families often have fewer planning options and may be forced to make important financial decisions under significant stress.

Estate Planning and Medicaid Planning Work Together

Long-term care planning isn’t just about qualifying for Medicaid.

It also involves making sure the right legal documents are in place, including:

• Financial Powers of Attorney
• Healthcare Powers of Attorney
• Revocable Living Trusts (when appropriate)
• Updated Wills
• Beneficiary designations

A comprehensive estate plan can make it much easier for family members to manage finances and make healthcare decisions if one spouse becomes incapacitated.

Every Family’s Situation Is Different

Although the spousal impoverishment rules provide valuable protections, Medicaid eligibility depends on many factors, including:

• Income
• Assets
• Marital status
• Living arrangements
• Timing of transfers
• Applicable Medicaid regulations

There is no one-size-fits-all solution.

What works well for one family may not be appropriate for another.

The Bottom Line

The Illinois spousal impoverishment protections were created to prevent a heartbreaking situation: forcing one spouse into poverty simply because the other needs long-term care.

These rules allow many married couples to preserve significant assets and income while still qualifying for Medicaid assistance. However, successfully navigating the Medicaid application process often requires careful planning and a thorough understanding of Illinois law.

If you or your spouse is beginning to consider nursing home care or long-term care planning, seeking legal guidance early can help protect your family’s financial future and avoid costly mistakes.

If you have questions about Medicaid planning, long-term care planning, or your estate plan, contact the Law Office of Jonathan W. Cole P.C. at (708) 529-7794 Your Neighborhood Law Firm.