Downsizing a home when applying for Medicaid long term care

Last updated: August 20, 2020
Medicaid Long Term Care | Questions and AnswersCategory: EligibilityDownsizing a home when applying for Medicaid long term care
medicaidplanner Staff asked 4 years ago

Do Proceeds from the Sale of a House Count Against Medicaid’s Income or Assets Limits if the Funds will be Used to Purchase Another Home?

1 Answers
medicaidplanner Staff answered 4 years ago

No, the proceeds from the sale of a house will not count against Medicaid’s income or asset limits if the funds are used to purchase another home. However, certain conditions must be met, which will be covered below.
To begin, generally speaking, one’s primary home is not counted towards Medicaid’s long term care asset limit, which in most states is $2,000 for an individual applicant. For the home to be exempt, the Medicaid applicant must live in it (or have intent to return to it) and his / her equity interest (the value of the home actually owned by the applicant) must be under a specific amount. At the time of this writing, it is usually $595,000 or $893,000 based on the state in which one resides. (California is one exception in that there is no equity interest limit). However, if the applicant has a spouse living in the home, the home is exempt regardless of where the applicant lives or the applicant’s equity interest in the home. (State specific asset limits and equity interest limits can be found here). 
As mentioned above, one can sell their primary home and purchase another home with the proceeds from the sale without it counting against Medicaid’s income or asset limits. However, the funds must be used to purchase another home that is exempt from Medicaid’s asset limit. Furthermore, according to federal regulation, there is a limited timeframe (3 months) in which the new home must be purchased following the sale of the original home. Some states may have more lenient rules than other states. For example, California allows a Medicaid recipient 6 months to purchase another home.
If a new exempt home is not purchased from the proceeds from the sale of the original home within the timeframe allowed by Medicaid, the funds will count as assets towards Medicaid’s asset limit. Therefore, the proceeds will cause one to be ineligible for long term care Medicaid.
As a side note, just because a home is safe from Medicaid’s asset limit does not mean it is safe from Medicaid’s estate recovery program. Learn more here

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