When one spouse lives at home and the other spouse lives in a nursing home on Medicaid and the spouse at home dies, will the spouse in a nursing home inherit the home and if they do, does Medicaid take it? Do they have to sell it? If they sell it, does Medicaid take the proceeds? Or does the spouse get kicked off of Medicaid and out of the nursing home?
No, in the vast majority of cases, following the death of the community spouse (the non-Medicaid spouse who lived at home), Medicaid will not take the home, nor will force the sale of it. (Since it is very rare that Medicaid will “take” and force the sale of a Medicaid beneficiary’s home while he / she is still living, for the purposes of answering this question, we will assume this will not happen). If the Medicaid beneficiary does sell the home, Medicaid will not take the proceeds from the sale, but they will count as assets towards Medicaid’s asset limit. This will most definitely cause the Medicaid beneficiary to have “excess” assets, resulting in Medicaid disqualification. During this time, the individual will have to pay privately for nursing home care, but he / she will not be kicked out of the nursing home. Once the “excess” assets are “spent down” to Medicaid’s asset limit, he / she can reapply for nursing home benefits. Further detail and explanation is provided below. (Please note that for the purpose of answering this question, we assume the word, “inherit,” is being used very loosely and that the couple jointly owned the home, as is the case with most married couples).
To be eligible for long term care Medicaid, an applicant must have limited assets, among other eligibility criteria. In most states, the asset limit is $2,000. (To see asset limits and other requirements for eligibility by state, click here). Some assets, such as one’s primary home, is generally exempt from Medicaid’s asset limit. (This means it does not count towards the limit). For a single applicant residing in a nursing home, he / she must have “intent” to return to the home and have an equity interest in the home under a specific value. (One’s equity interest is the value of the home of which he / she outright owns). At the time of this writing, it is generally either $595,000 or $893,000. (To see state by state equity interest limits, click here). In the case of a married couple, in which one spouse continues to live at home, the couple’s home is exempt from Medicaid regardless of the applicant’s “intent” to return home or his / her equity interest in the home. However, when the spouse at home passes away, the nursing home beneficiary must express an “intent” to return home at some point and have an equity interest in the home under the state’s specified value for the home to remain exempt from Medicaid’s asset limit.
As mentioned above, if a Medicaid beneficiary does sell his / her home, it can be expected that the proceeds from the sale push him / her over Medicaid’s asset limit. When one has “excess” assets, he / she must spend them down until Medicaid’s limit is reached. As a word of caution, one cannot spend the “excess” assets in any manner he / she wishes. This is because Medicaid has a look back period of 60-months in which Medicaid scrutinizes all asset transfers to ensure no assets were gifted or sold under fair market value. (except for CA and NY). At this time, the program does not have a look back period.) If one violates the look back rule, it is assumed it was done with the intention of meeting Medicaid’s asset limit and he / she will receive a penalty period of Medicaid disqualification. One way in which one can spend down the extra assets without violating the look back rule is to use the funds to pay for nursing home care. Other examples can be found here.
It is important to note that one’s home, although most likely exempt while the Medicaid recipient is living, is not usually safe from Medicaid’s estate recovery program (MERP). All states have a MERP program in which the Medicaid agency attempts to collect payment for long term care services for which it paid during the life of a deceased Medicaid beneficiary. Often, the only asset of any value remaining is one’s home, and it is through the home that Medicaid most commonly tries to be reimbursed. To protect one’s home from MERP, advanced Medicaid planning must take place.
Professional Medicaid planners not only can provide advice given one’s particular situation, but they can also help to implement Medicaid planning strategies that protect one’s home.