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A common concern among elderly persons applying for (or receiving) nursing home care or other assistance from Medicaid is what will happen to their home. This is also frequently a concern of adult children whose mother, father, or both parents need Medicaid assistance in order to reside in a nursing home facility. Can Medicaid take the home when the elderly individual moves to a nursing home? Can the state take the home after the Medicaid recipient dies? What if a spouse or other family member lives in the home? Is there a way for the home to be protected as inheritance for family? Unfortunately, these are complicated questions and the answers depends on a family’s specific situation.
Medicaid Estate Recovery Program Rules
All 50 states have Medicaid Estate Recovery Programs (abbreviated as MERP or MER). Following the death of a Medicaid recipient, these programs, which have been a federal law since 1993, attempt to collect reimbursement for the cost of Medicaid funded long-term care in which the state paid for that individual. (This can be for in-home care, assisted living services, or nursing home care.) These funds are collected via estate recovery, and often the only asset a deceased Medicaid applicant still has of any significant value at the time of death is his/her home. To be very clear, estate recovery does not apply when a Medicaid recipient is still living. It only applies when he/she passes away and is unmarried. Said another way, if a Medicaid applicant dies and still has a living spouse, Medicaid cannot attempt to recover long-term care costs.
However, it’s important to note that not all states run their MERP programs the same way, so there are some differences based on the state in which one resides. For instance, in some states, such as Florida, if the Medicaid recipient passes away, leaving a surviving spouse, the state will try to recover long-term care costs after the surviving spouse dies. Other states, such as California and Texas, prohibit estate recovery following the death of a surviving spouse preceded in death by a Medicaid recipient. The only exception is if the surviving spouse was also a Medicaid recipient.
Another consideration of Medicaid estate recovery programs is that one’s situation and estate planning techniques have an impact on whether or not Medicaid will be able to collect funds from the sale of one’s home.
Can Medicaid Take My Home? Different Scenarios Explained
Single and live alone in the home
As long as you live in your home, Medicaid cannot take it. However, if you receive long-term care assistance from Medicaid, once you pass away, the state will file an estate recovery claim to be reimbursed for your cost of home and community based care. Therefore, once your home is sold, the state will likely collect all or some of the proceeds from the sale as reimbursement. That said, there are some exceptions in which the state cannot attempt estate recovery, such as if you have a child under 21 years old or have a child that is disabled or blind.
Single and moving to a nursing home
When you relocate to a nursing home, you must provide a written statement that indicates your “intent to return home”, which will allow your home to remain exempt under Medicaid rules. Stated another way, it protects your home from Medicaid while you reside in a nursing home facility. Without an “intent to return home” statement, your home would make you ineligible for Medicaid. Therefore, you would have to sell it and use the proceeds for your nursing home care until you are financially eligible for Medicaid.
If you opt for an “intent to return home” statement, remember that expenses for the home, such as property taxes, insurance, and mortgage, will still need to be paid. Without friends and family helping to cover the cost of home expenses, this isn’t feasible given the small Medicaid asset limit (generally $2,000) and personal care allowance (approximately $50 / month) for a person on nursing home Medicaid.
If the state believes that your stay in a nursing home will be a permanent arrangement, the state can file a lien against your home. However, this does not mean that you have to immediately sell it. It simply means that when your house is sold, the state will receive money from the sale for reimbursement for the cost of your Medicaid-funded care. However, if the home is sold while you are still alive, the proceeds from the sale will disqualify you from Medicaid until you have “spent down” the proceeds on your nursing home care. If you are able to move back into your home, the lien against it will be removed.
It’s also important to note, upon your death, the state is able to file a claim against your estate, which includes your home, in order to collect funds for repayment of your nursing home care expenses.
Single and grown children live in the home
Your home is considered exempt as long as a disabled or blind child, or a minor (under 21 years of age) lives in it. To be clear, if you have healthy adult children who live in your home, it is not considered to be an exempt asset. However, you can file an “intent to return home” statement, indicating that you plan to move back home in the future. This will protect your home from Medicaid while you are alive. Once you die, Medicaid will try to collect for the amount that they paid for your long-term care costs via Medicaid estate recovery. Even after your death, if you have a disabled, blind, or minor child, the state is not able to touch your home. However, there is another exception called the caregiver adult child exemption, which allows a Medicaid recipient to transfer their home to a healthy adult child under certain circumstances. Learn more below under “Caregiver Exemption”.
Single and has passed away
After the death of a Medicaid recipient, the state will try to recover the cost of long-term care for which it paid through a home sale. However, the state cannot do this if the deceased has child that is disabled, blind, or under 21 years of age.
Married and one spouse moving to a nursing home
When your spouse moves into a Medicaid funded nursing home, you are considered the community spouse, and as the community spouse, you are entitled to keep your home. This holds true regardless of the equity value in your home. However, the best way to handle this situation is to have the title of the home in solely your name. As the spouse of the Medicaid applicant, the home can be transferred to you without violating Medicaid’s look back period. Transferring the home to solely your name will also protect your home from Medicaid making an estate recovery claim (a claim to be paid back for the cost of your spouse’s nursing home care). This is because the home will no longer be a part of your spouse’s estate upon death. As stated above, some states, such as California, also do not attempt estate recovery if the community spouse outlives the institutionalized spouse.
Married and one spouse in nursing home passed away
As long as there is a living spouse and he/she lives at home, the home is exempt from estate recovery. Some states’ Medicaid estate recovery programs attempt to recover long-term care costs after the death of a surviving spouse. Other states do not try to recover costs after the death of a surviving spouse unless he/she was also a Medicaid recipient.
Married and one spouse living at home passed away
Under these circumstances, if the spouse who lives in the nursing home has no “intent” to move back home, Medicaid may demand that the home be sold. In this situation, the proceeds from the sale of the home would be used towards paying the cost of nursing home care until the proceeds were “spent down” to the eligible Medicaid limit. At this time, the institutionalized spouse could reapply for Medicaid. Even if the home was solely in the name of the spouse who lived at home (this spouse is also referred to as the community spouse), the institutionalized spouse may inherit the home via what is called “intestate succession”. (This is when a spouse dies without a valid will and the deceased’s assets are passed onto the living spouse). If this happens, the home will be counted as an asset and the institutionalized spouse will be disqualified for Medicaid until the home is sold and the proceeds spent down on care.
Both spouses have passed
Depending on the circumstances, a number of scenarios could play out. If both spouses were Medicaid recipients, the state will try to recover the funds in which it spent for long-term care costs. If only one spouse was a Medicaid recipient and passed away prior to the death of the non-Medicaid spouse, the state may or may not attempt to recover the costs for care. (This depends on the state in which one resides). If the non-Medicaid spouse died prior to the Medicaid recipient spouse, the state will try to recover the funds it spent for long-term care. However, if the couple has a disabled, blind, or minor (under 21 years of age) child, the state cannot attempt estate recovery.
Both spouses have passed, grown children live in home
Assuming both spouses were Medicaid recipients, the state will try to collect funds for repayment of care via estate recovery unless the home was previously transferred to one of their adult children via the caretaker child exception. (Learn more below under “Caregiver Exemption”). If only one spouse received Medicaid funded care and passed away prior to the non-Medicaid recipient spouse, the state may or may not attempt estate recovery depending on the state in which one lives.
Please note: If the deceased has a living spouse, a child under 21 years of age, a disabled child, or a blind child, the state cannot try to recover costs from the deceased’s estate. Other exceptions also exist.
To learn more about Medicaid estate recovery in your state and how to protect your home from MERP, contact a Medicaid planning professional.
What Can Be Done to Protect the Home?
Keep Assets Out of Probate
In states that only seek Medicaid estate recovery through probate, there are ways for a Medicaid recipient to keep his/her home out of probate. (Remember, probate is a legal process that involves ensuring one’s will is valid, determining the value of the deceased’s assets, and paying any remaining taxes and bills). This is good news because this means that one can keep their home, and proceeds from selling the home, safe from Medicaid. Remember, only assets solely owned by the deceased go through probate, which means if the house is jointly owned, it will not be included in the probate estate. In addition, if a home is in a life estate, it will not go through probate. With a life estate, a Medicaid recipient only has ownership of their home while he/she is alive (they are referred to as life tenant), and upon his/her death, home ownership is transferred to another person, often the deceased’s child (referred to as the remainderman).
Another option to protect one’s home is to establish an irrevocable (it cannot be changed or cancelled) trust that holds the title of the home. (In an oversimplified explanation, there is a “trustee” who manages the trust, and the person who created the trust no longer is considered to be the owner of the assets. However, one’s children can be named as beneficiaries, which protects the home as inheritance.) The problem with this strategy is timing, as this type of transfer will violate Medicaid’s look back rule and create a period of Medicaid ineligibility. Therefore, this strategy needs to be implemented well before it’s thought one might require Medicaid assistance. Five years to be exact, in order to avoid the look back period. However, one exception is the state of California, which only has a 36-month look back period. Another exception is a married couple with just one spouse requiring nursing home Medicaid assistance. In this situation, if the home is solely in the name of the community spouse, he/she can transfer the home into an irrevocable trust without impacting the Medicaid eligibility of the institutionalized spouse.
In most cases, the home cannot be transferred to an adult child without jeopardizing one’s eligibility for Medicaid. (Medicaid has a look back period that if one is found to have violated by gifting assets or selling them for less than they are worth, a period of Medicaid ineligibility will result). However, there is one exception known as the caregiver child exemption or caretaker child exception. This rule allows a parent to transfer their home to their adult child under the following circumstances without violating the look back period. First, the adult child must have lived with his/her parent at least two years prior to the parent moving to a nursing home or assisted living facility paid for by Medicaid. Second, the adult child must have provided care that delayed the necessity of the parent moving out of the home and into a nursing home.
The Sibling Exemption allows the home to be transferred to a sibling who is part owner of the house and who lived in the home for at least one year prior to his/her sibling moving into a Medicaid-funded nursing home. This must be done correctly in order to avoid violating Medicaid’s look back period and creating a period of Medicaid ineligibility.
Work with a Medicaid Planner
Protecting one’s home from Medicaid is extremely complicated and involves planning and knowledge of federal and state laws in the state in which one resides (where the home is owned). Therefore, with Medicaid planning, it is strongly advised one seek the counsel of a professional Medicaid planner before trying any of the above strategies to protect one’s home from the Medicaid estate recovery program. Incorrectly transferring ones’ home can result in Medicaid ineligibility. In addition, some states now allow estate recovery under an “expanded definition of estate”. This may include life estates, property that is jointly owned, and so forth. Hence, all the more reason to seek professional counsel!