My mother is living with me. Can I collect rent from her to cover her monthly expenses? If so, how would this affect the look back period if she needs Medicaid in the future?
Yes, you can collect rent from your mother to cover her monthly expenses. However, you must take action to ensure that doing so does not violate Medicaid’s look back period and be a potential cause for Medicaid ineligibility in the future.
All states have a Medicaid look back rule in which the state Medicaid agency reviews all past financial transactions for 60-months immediately preceding the date of one’s long-term care Medicaid application. (The only exception is California, which has a look back period of 30-months). This “look back” is done to ensure that applicants do not give away assets or sell them under fair market value in order to meet Medicaid’s asset limit, and hence, qualify for Medicaid. (Most states have an applicant asset limit of $2,000, but there is some variance based on the state. Furthermore, some assets are not counted towards Medicaid asset limit. To see asset limits by state, and to learn which assets generally are not counted towards the limit, click here). Violating the look back rule is cause for penalization in the form of Medicaid ineligibility.
Therefore, in the case of your mother paying you monthly rent, she must be able to prove why she is giving you the money. Without proper documentation, Medicaid will most likely assume the money is a gift to you, which violates the look back rule. That said, it is imperative that a valid rental lease (in writing) be created, indicating that monthly payments made to you are for rent. The monthly rent amount must be reasonable, meaning it is in line with the average cost for a room rental in your geographic area. If your mother overpays, this would also very likely be considered a gift, and therefore, a violation of the look back period. Please note that your mother should not make any payments until a rental agreement is in place. Furthermore, your mother cannot backpay you for monthly rent.
If you have any questions or concerns, it is highly suggested that you seek the counsel of a professional Medicaid planner. Incorrectly creating a rental agreement, charging too much, and other simple mistakes can unfortunately result in Medicaid ineligibility.