Yes, if you sell your mom’s house, she most likely will lose her Medicaid coverage. This is because in order to qualify for Medicaid, there is an asset limit. Generally speaking, in most states, this asset limit is $2,000. (To find the asset limit in your state, click here). However, there are a number of higher valued assets that are exempt (not counted) towards the asset limit. This includes one’s primary home, given the applicant (or his / her spouse) lives in the home, or the applicant expresses an “intent” to return to the home in the future.
If you sell your mom’s house, you are basically taking an exempt asset and turning it into a countable asset. Stated differently, the money from the sale of the home will count towards Medicaid’s asset limit. More often than not, this extra cash will put a Medicaid recipient over the asset limit, which is cause for Medicaid disqualification.
In this situation, it becomes necessary to “spend down” the excess assets (the profits from the sale of the home) in order to meet Medicaid’s asset limit. This can be done by paying off debt, purchasing an irrevocable funeral trust, buying an annuity, paying for long-term care, and even taking a vacation. Once the excess assets have been “spent down” and the individual has assets at or under Medicaid’s asset limit, he / she can reapply for Medicaid.
When “spending down” assets, it is critical to be aware that Medicaid has a look-back period (60-months in all states, but California, which is 30-months). Simply put, Medicaid reviews all past asset transfers during the look-back period. If an applicant (or even the applicant’s spouse) has given away assets or sold them for less than they are worth during this timeframe, this is a violation of the look-back rule. This will result in a period of Medicaid disqualification.