Maryland Medicaid Planning: What Families Must Know

What Happened

A recent analysis from a Montgomery County estate planning firm highlights the growing financial pressure facing Maryland families who support both aging parents and dependent children. This population, commonly called the sandwich generation, faces a narrowing window to act on Medicaid planning before long-term care costs consume family savings built over decades.

The piece centers on Medicaid's five-year look-back period, a federal rule that scrutinizes asset transfers made within 60 months before a Medicaid application for long-term care benefits. Transfers that fall outside Medicaid's strict guidelines can trigger penalty periods, during which an applicant becomes ineligible for benefits. The analysis warns that Maryland families who delay planning frequently encounter this barrier at the worst possible moment, when a parent already needs nursing home care and options have narrowed dramatically.

The article also identifies the Community Spouse Resource Allowance as a critical planning tool. In 2026, a non-applicant spouse may retain up to $162,660 of a couple's combined assets under this allowance, though state-specific limits can vary. The piece emphasizes that proper planning maximizes this protection, while delay often leads families to spend down assets under pressure, making costly errors that proper advance planning could have prevented.

What It Means

For Maryland residents, the stakes of delayed Medicaid planning extend well beyond federal rules. Maryland operates its own distinct estate and inheritance tax structure, which interacts directly with long-term care planning decisions. Maryland imposes a state estate tax with an exemption of $5,000,000Md. Tax-Gen. § 7-309Verified Sep 15, 2026View source, well below the federal exemption of $15,000,00026 USC 2001(c), 2010; P.L. 119-21 §70106Verified Sep 15, 2026View source. The state also levies an inheritance tax at a flat 10% rate on assets passing to non-exempt recipients, including nieces, nephews, cousins, and unrelated individuals. Most immediate family members — spouses, children, grandchildren, parents, grandparents, and siblings — receive a full exemption from this tax. Families navigating Medicaid planning must account for both layers of potential taxation when structuring asset transfers and trust arrangements.

Maryland's probate process adds another dimension to long-term care planning. The state does not offer independent administration, meaning estates pass through a supervised court process that typically runs 9 months to 12 months. Attorney fees run approximately 2.1%Md. Est. & Trusts § 7-602 (reasonable compensation; no statutory percentage)Verified Sep 8, 2026View source to 3.3%Md. Est. & Trusts § 7-602 (reasonable compensation; no statutory percentage)Verified Sep 8, 2026View source of the estate's value, representing a significant cost that families can potentially avoid through proper trust planning. Maryland also requires a surety bond for personal representatives, though the will can waive this requirement, adding further cost and complexity to estates that pass through the court system. Families who establish revocable living trusts before a long-term care crisis often find their estates settle far more efficiently, preserving more assets for surviving family members. The article on avoiding probate with a trust explains how this structure works in practice.

The intersection of Medicaid planning and Maryland's small estate rules also deserves attention. Maryland allows a simplified affidavit procedure for estates with personal property valued at $50,000Md. Est. & Trusts § 5-601Verified Sep 8, 2026View source or less, rising to $100,000Md. Est. & Trusts § 5-601Verified Sep 8, 2026View source when the surviving spouse is the sole heir. However, real property counts toward these thresholds, meaning many Maryland families with modest homes will not qualify for simplified procedures. This reality reinforces why advance planning, including trust structures designed to hold real property, matters so much for families navigating both Medicaid eligibility and eventual estate settlement. Maryland's intestate succession rules further complicate matters: when a minor child survives alongside a spouse, the spouse receives only half the estate under the default rules. Families relying on intestacy rather than a written plan may find assets distributed in ways that conflict with their actual intentions. Understanding how estate tax and inheritance tax interact helps families structure their plans more effectively.

Context from SimplyTrust

Long-term care planning sits at the intersection of Medicaid law, estate structure, and family dynamics — and Maryland's rules make this intersection particularly complex. Families dealing with aging parents often discover that decisions made years earlier, such as how property is titled or whether a trust exists, determine how much flexibility they have when care becomes necessary. Understanding the full scope of Maryland's probate process, inheritance tax rules, and small estate thresholds helps families make informed decisions before a crisis forces their hand. The article navigating Medicaid and estate planning for aging parents offers a broader look at how these planning layers connect. For families just beginning to think about these issues, understanding health care proxies and powers of attorney represents a practical first step toward building a comprehensive plan that addresses both immediate care decisions and long-term asset protection.

Maryland's will execution requirements are straightforward: a testator must be at least 18 yearsMd. Est. & Trusts § 4-102Verified Oct 18, 2026View source old and sign before 2Md. Est. & Trusts § 4-102Verified Oct 18, 2026View source witnesses. Notarization is not required for a valid will. Maryland does not recognize handwritten wills, meaning an informal document without proper witnesses carries no legal weight. For financial powers of attorney, Maryland requires both 2Md. Code, Est. & Trusts §§ 17-101 to 17-116, §§ 17-201 to 17-204; Md. Code, Real Prop. § 4-107; Md. Code, Gen. Prov. § 1-401Verified Sep 18, 2026View source witnesses and notarization. Maryland permits springing powers of attorney, which activate only upon a defined triggering event such as incapacity — a feature particularly relevant for families planning around a parent's potential cognitive decline. Having these documents in place before a health crisis arises gives families the legal authority to manage a parent's finances and healthcare without court intervention, avoiding the time and expense of guardianship or conservatorship proceedings.

Source: Worried About Your Parents' Long-Term Care? Act Before It's Too Late - JDKatz