“Spend down” refers to reducing countable assets to allow Medicaid qualification in North Carolina. For North Carolina Medicaid, a nursing home residence can only have $2,000 of countable assets. The process of reducing bank accounts, life insurance, IRAs, and other countable assets to only $2,000 would be called “spending down.”
Gifts to others (besides the nursing home resident’s spouse) are not permitted. You may pay for anything for the benefit of the nursing home resident. That could include clothing, furniture and furnishings, an irrevocable prepaid funeral funeral contract, entertainment, extra therapy. It also includes legal fees paid to plan the resident’s estate and to qualify the resident for Medicaid. You may also be able to pay off existing mortgages or credit card debt, and to repair the home.
Note that the spend down rules are different for a married couple. Generally the spouse remaining at home can keep the homeplace and the Community Spouse Resource Allowance and still qualify the ill spouse for Medicaid.
These rules are state specific, so don’t rely on news articles websites that talk about states other than North Carolina. To know for certain is allowed, you need to meet with a local elder law attorney, who can let you know if there are other planning steps available in your situation.