Paying Rent to In-Laws Violate Medicaid Look Back

Last updated: May 08, 2024
Medicaid Long Term Care | Questions and AnswersCategory: EligibilityPaying Rent to In-Laws Violate Medicaid Look Back
medicaidplanner Staff asked 4 years ago

My mother-in-law 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?

1 Answers
medicaidplanner Staff answered 4 years ago

Yes, you can collect rent from your mother-in-law 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.

Nearly 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 “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, which is generally $2,000, and hence, qualify for Medicaid. Violating the Look-Back Rule is cause for penalization in the form of Medicaid ineligibility. See state-specific Look-Back Rules and Asset Limits.

In the case of your mother-in-law 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. 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-in-law overpays, this would very likely be considered a gift, and therefore, a violation of the Look-Back Period. Note that your mother-in-law should not make any payments until a rental agreement is in place. Furthermore, your mother-in-law 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.

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