Medicaid Caregiver Child Exemption: Transferring a Parent’s Home to an Adult Caregiver Child without Medicaid Penalty

Last updated: November 03, 2023


Definition: Child Caregiver Exception / Child Caretaker Exemption

The Child Caregiver Exception, also called the Child Caretaker Exemption, allows seniors to transfer their primary home to their adult child who has been providing them with care. This exemption allows them to do so without violating Medicaid’s Look-Back Period and jeopardizing their long-term care Medicaid eligibility.

The Look-Back Period is generally 60-months in which Medicaid reviews all asset transfers immediately preceding one’s application for Nursing Home Medicaid or Home and Community Based Services (HCBS) via a Medicaid Waiver. If assets were transferred for less than fair market value during this timeframe, a Penalty Period of Medicaid ineligibility is established. In the case of the home, fair market value is the amount it would sell for if sold on the open market. If all of the conditions of the Child Caregiver Exception are met, transferring the home to one’s adult child without payment is an exception to the Look-Back Rule.

The Child Caretaker Exemption also protects the home from Medicaid’s Estate Recovery Program (MERP). Following a long-term care Medicaid beneficiary’s death, it is via MERP that the state attempts reimbursement of costs for which they paid. If one’s home has been transferred to their adult child via this exemption, there is no home available to Medicaid from which they can be reimbursed.

The transfer of home ownership to one’s adult child via the Child Caretaker Exemption is considered compensation for providing care that delayed the need for the parent’s Medicaid-funded “institutionalization”. While “institutionalization” encompasses Medicaid-funded nursing home care, the term is misleading. Seniors who require a Nursing Facility Level of Care, but receive services via a HCBS Medicaid Waiver, are also considered to be institutionalized. This means that the individual may continue to live at home with Medicaid-provided long-term services and supports. One may also potentially live in an adult family care home (adult foster care) or an assisted living residence. However, for the purposes of this article, we will discuss the Child Caregiver Exception in the context of Medicaid-funded nursing home care since it is most common.

 Did You Know? Seniors can transfer their primary home for less than fair market value to their spouse, their minor child (under 21 years old), or their child of any age who is blind or disabled without risk of Medicaid ineligibility. Furthermore there is a Sibling Exemption. This allows a senior to transfer their home to a sibling who has an equity interest in the home and lived there for a minimum of one year immediately preceding their institutionalization (i.e., nursing home admission). Unlike with the Child Caretaker Exemption, there is no requirement that the non-applicant sibling provided care for the applicant-sibling.


How Does the Child Caregiver Exemption Work?

To qualify for the Child Caretaker Exemption, the adult child must move into their parent’s home and live with their aging parent for a minimum of 2 years immediately prior to the parent’s admittance to a nursing home. The parent’s home must become the caretaker child’s primary home and they must live there continuously during the 2-year period. To be clear, if the adult child lived with their parent and provided care for 23-months prior to their parent being institutionalized, they are not eligible for this exemption. This living and care arrangement must take place for at least 2 years.

The level of care provided by the caregiver child must be great enough that it delays the parent’s need for nursing home care for those 2 years. This care generally includes assistance with Activities of Daily Living (ADLs) and Instrumental Activities of Daily Living (IADLs). This includes toileting, bathing, dressing, personal hygiene, transitioning from one position to another, mobility, meal preparation, grocery shopping, and medication management. For cognitively impaired persons, such as those with Alzheimer’s disease or a related dementia, supervision to ensure the parent’s health and safety, such as prevention of wandering, might also be provided.

While the adult child is generally the one that provides the parent with full-time care, it may be possible for them to work outside of the home. In this case, financial support for alternative care, such as adult day health care or an in-home health aide, must be provided during work hours. While there is no federal statue stating that the adult child must be the sole caregiver, some states are more lenient than others. For example, New Jersey previously would not allow the Child Caretaker Exception if the caregiver child worked outside of the home. However, in March of 2021, the courts ruled in favor of a caregiving child who hired home aides to care for his mother while he worked outside of the home.

The caretaker child must be a biological or adopted child. In-laws, stepchildren, grandchildren, and nieces and nephews do not qualify for the Child Caregiver Exemption.

Only a senior’s principle residence (primary residence) is eligible for the Child Caregiver Exemption. Second homes and vacation homes cannot be transferred via this exemption.

 If an adult child resides with their parent for more than two years and provides them with care, but moves out of the home prior to their parent’s institutionalization, they do not qualify for the Caregiver Child Exemption.


What Proof is Required by Medicaid for the Child Caregiver Exemption?

The applicant is responsible for proving the Caregiver Child Exemption requirements have been met. The following documentation may be required:

• Proof of the Parent-Child Relationship
A birth certificate or adoption certificate.

• Proof of the Caregiver Child’s Residency in their Parent’s Home
Documents in the caregiver child’s name with their associated address the same as their parent’s primary home. Examples of documents might include one’s driver’s license, car insurance policy, voter registration card, tax return, and utility bills.

Another option is to provide affidavits, which are written statements under oath. These statements can be from neighbors or other relatives or friends who were aware of the living situation and the dates the adult child lived in the home.

• Proof Care was Provided and Prevented Nursing Home Admission
A statement from the parent’s physician is generally required. It should state that the aging parent required care, the type of care needed, the duration the care was required, that this care was provided by the adult child, and without the provided care, the parent would have required nursing home care. Medical conditions related to the need for care and associated limitations should also be included. In some cases, the Medicaid agency may also request medical records.

The caretaker child should keep a daily care log documenting the type of care provided and the extent to which it was provided. The log should include any medications and / or treatments and when they were given, as well as transportation to doctor appointments. Specific events that occurred during the 2-year period that would have resulted in nursing home placement if the adult child were not providing care should also be recorded.

Affidavits from relatives and neighbors can also be provided that attest to the extent of care provided by the caregiver child.

If the adult child was working outside of the home rather than providing full time care for the parent, proof that the parent attended adult day care or an agency provided in-home care will be required. This can be a statement from the adult day care facility or home care agency indicating the dates in which care was provided and the type and extent of care provided.


Are there Monetary Limits / Maximums to a Home’s Value for the Child Caregiver Exemption?

While all states, with the exception of California, have a home equity interest limit for long-term care Medicaid eligibility (Nursing Home Medicaid or Home and Community Based Services via a Medicaid Waiver), there is no home equity limit when a home is transferred to an adult child via the Child Caretaker Exception. Home equity is the value of one’s home minus any home debts, such as a mortgage. One’s home equity interest is the amount of home equity that is owned by the Medicaid applicant.

If one is trying to establish Medicaid eligibility prior to transferring the home and the parent’s home equity interest is over the state’s limit, this could become an issue. See state-specific home equity interest limits.


Are the Child Caregiver Exemption Rules the Same in All States?

The basic rules governing the Child Caregiver Exemption are the same in all states; the adult child must live in the parent’s home for a minimum of 2 years immediately preceding nursing home admission and must provide a level of care during this time that delayed the need for nursing home care. However, the interpretation of these rules may vary based on the state. As previously mentioned, New Jersey used to deny the Adult Child Caregiver Exemption if the child caregiver was not the sole caregiver. Prior to transferring a home to a child caretaker, one should verify the specific rules of this exemption in their state. Without the proper knowledge, one may unknowingly make a disqualifying transfer, jeopardizing their long-term care Medicaid eligibility.


Is Professional Assistance Needed to Utilize the Child Caregiver Exemption?

It is recommended the counsel of a professional Medicaid Planner be sought prior to transferring one’s home to an adult caregiver child. While the rules surrounding the Child Caregiver Exemption may sound fairly straightforward, the rules are more lenient in some states than others, documentation must be provided, and the required documentation may be state-specific. Failure to meet all of the conditions or submit all required documents can result in denial of the home transfer, or if the home has already been transferred, cause a Penalty Period of Medicaid ineligibility.

Regardless of whether an adult child is considering utilizing this planning strategy, currently providing care for an aging parent, or has already provided care, a Medicaid Planner can provide assistance in understanding one’s state rules and ensuring appropriate documentation is provided. Furthermore, outside of the adult Child Caregiver Exemption, there are other planning strategies, such as the Lady Bird Deed, through which one can protect their home from Medicaid’s Estate Recovery Program. Find a Medicaid Planner in your area.

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