There is considerable confusion regarding if a home should be sold to pay for long-term care. This is justified, as the questions are nuanced and the answers are complicated, especially when the question is asked in the context of Medicaid eligibility and rules.
If one’s single elderly mother requires nursing home care, will she need to sell her home to qualify for Medicaid? If one’s great uncle receives Medicaid-funded nursing home care and his house is sold, will he lose his Medicaid eligibility? If one’s spouse is on Nursing Home Medicaid and the spouse at home wants to sell their home and downsize to a smaller one, will Medicaid still pay for their spouse’s nursing home care? What if the home is already sold? Could that impact one’s ability to qualify for long-term care Medicaid?
There are several things to consider when thinking about selling one’s primary home. Is it exempt from Medicaid’s asset limit? If so, if one is single and a nursing home resident, will there be funds available to maintain the home? Does the individual intend to return home? Will the home go to Medicaid’s Estate Recovery Program after the Medicaid beneficiary dies?
In most cases, the home is exempt from Medicaid’s asset limit. This means it is not a countable asset, and therefore, it is not necessary to sell it to qualify for Medicaid. If one sells the home, however, the proceeds from the sale are counted towards Medicaid’s asset limit. This likely will cause one to be over Medicaid’s asset limit and ineligible for Medicaid. They will have to “spend down” the excess assets on care and / or other nonexempt assets until they are at or below their state’s asset limit and then apply for Medicaid.
Note: California stands apart from the other states. CA eliminated their Medicaid (Medi-Cal) asset limit effective 1/1/24. Medi-Cal applicants and beneficiaries can have unlimited assets and still be eligible for Medi-Cal. They could sell their home and it have no impact on their eligibility. The state, however, continues to have an Estate Recovery Program.
Medicaid’s Home Exemption Rule
If considering selling one’s home, one should first determine if it is an “exempt” asset. If it is exempt, it does not impact one’s Medicaid eligibility. A Medicaid applicant’s home is automatically exempt, regardless of where they live, if one of the following persons live in their home: their spouse, their minor child (under 21 years old), or their permanently disabled or blind child (no age limit).
For a single Medicaid applicant applying for Nursing Home Medicaid or home and community based services via a Medicaid Waiver, there is a home equity interest limit for home exemption. Home equity is the difference between what is owed on the house and the home’s fair market value. Equity interest is the portion of the home equity that is owned by the applicant. In 2024, the home equity interest limit is state-specific, but generally is either $713,000 or $1,071,000. Furthermore, those who do not live in their home (such as those who live in a nursing home), must have Intent to Return home in order for it to remain an exempt asset. If they do not have Intent to Return, their home is no longer exempt and they may be forced to sell it to qualify for long-term care Medicaid.
Considerations for Nursing Home Residents
For single Medicaid nursing home beneficiaries whose homes are exempt from Medicaid’s asset limit, it may not be feasible for them to financially maintain their home. While Nursing Home Medicaid has an income limit, usually $2,829 / month in 2024, a nursing home beneficiary is not able to maintain all their income once determined eligible for Medicaid. Nearly all of a nursing home resident’s monthly income, with the exception of a Personal Needs Allowance (PNA), goes towards the cost of their nursing home care. The amount of one’s PNA is state-specific, but is very minimal, and ranges from $30 – $200 / month. Therefore, having the funds to maintain one’s home becomes an issue.
There is, however, a Home Maintenance Allowance, also called a Home Maintenance Deduction. This is intended for single persons who are expected to be in the nursing home temporarily, generally 6 months or less. This allowance allows them to financially maintain their home in their temporary absence. For this allowance, persons must express an Intent to Return and a doctor must certify that they likely will be able to return home within 6 months. Most states limit the Home Maintenance Allowance to 6 months, and therefore, if after 6 months the nursing home resident does not return home, the allowance ends. If there is no one that can maintain the home financially, one may have to sell their home because they can no longer afford to maintain it.
Married Medicaid nursing home beneficiaries with non-applicant spouses are not able to receive a Home Maintenance Allowance. This is because the non-applicant spouse is entitled to a Monthly Maintenance Needs Allowance / Spousal Income Allowance from their applicant spouse, which allows them to continue to maintain the home. Unlike the Home Maintenance Allowance, the Spousal Income Allowance is not time-limited.
Proceeds from Selling One’s Home
Medicaid has an asset limit, which in most states, is $2,000. See state-specific asset limits. While one’s home is generally exempt from Medicaid’s asset limit, the proceeds from selling one’s home, in most cases, is not exempt; it will be counted towards Medicaid’s asset limit. This, more likely than not, will disqualify one from Medicaid due to having “excess” assets. If this is the case, extra assets will have to be “spent down” on long-term care and non-countable assets and then one can apply (or reapply) for Medicaid.
If one reinvests the sales proceeds into another Medicaid-exempt home within three months, the proceeds will remain exempt. If any proceeds remain (not invested in a new home), they will count towards the asset limit. Furthermore, if a Nursing Home Medicaid beneficiary is married and the home’s title is solely in the name of the non-applicant spouse at the time of the sale, the non-applicant spouse may be able to keep the proceeds without impacting their spouse’s Medicaid eligibility. This is because assets in the name of the spouse at home are not available to a nursing home spouse the month following the month they became eligible for Medicaid-funded nursing home care.
This situation is complicated and it is recommended one consult with a Medicaid Planning Expert prior to taking any action.
Selling the Home for Fair Market Value
If one sells their home, it is vital that it be sold for fair market value. This is the estimated value of the home if it were sold in the current market. Persons who require long-term care and do not have the funds in hand to pay for such care may feel rushed to sell their home. There are many cash homebuying companies / quick house sales companies that advertise a cash sale within days or weeks. As convenient and stress-free as it might sound to quickly sell one’s home and have cash in hand, these “We Buy Homes” / “We Buy Houses” companies buy homes at a low sales price and it is very unlikely one will get fair market value.
Another common “fair market value” violation is when an aging parent wants to sell their home to their children at a discounted rate. Doing so is in violation of Medicaid eligibility rules and will likely result in an application denial (a penalty period of ineligibility), or if one is a current Medicaid beneficiary, they would likely lose their benefits.
Selling one’s home for under fair market value is a violation of Medicaid’s Look-Back Period. This is generally a period of 60-months immediately preceding one’s long-term care Medicaid application in which the Medicaid agency scrutinizes asset transfers. If assets have been gifted or sold for under fair market value, the individual is penalized with a Penalty Period of Medicaid ineligibility. As an example, if the fair market value of one’s home is $250,000 and the home is sold for $200,000, $50,000 is considered a gift, and is a violation of the Look-Back Rule.
Note that in California there is no Look-Back Period for any asset transfers made on or after 1/1/24.
Medicaid’s Estate Recovery Program
If one does not sell their home, it is important to be aware of Medicaid’s Estate Recovery Program (MERP). While a long-term care Medicaid beneficiary’s home is generally exempt from Medicaid’s asset limit while they are living, once they die, the home may not be safe from Medicaid. Via MERP, a state’s Medicaid agency attempts to recover the cost of long-term care expenses for which it paid for the deceased Medicaid beneficiary. Commonly, it is through the sale of one’s home that Medicaid is reimbursed.
In some situations, MERP is not allowed. This includes when there is a surviving spouse, a minor child (under 21 years old), or a child (of any age) who is permanently disabled or blind. Furthermore, Estate Recovery cannot be made if the Child Caregiver Exception or the Sibling Exemption applies. More on when Medicaid can and cannot take the home.
Even if a state’s Medicaid agency is reimbursed via MERP, the Medicaid-funded rate is less than the private pay rate. Therefore, the family actually pays less by not selling the home to pay for long-term care, and later, reimbursing Medicaid through the sale of home. Medicaid can never collect more than was paid. If one’s home will be going to MERP, one should also consider the cost of maintaining the home while the Medicaid beneficiary is living. In some cases, selling the home might be a better option.
There are planning strategies available to protect one’s home from Medicaid’s Estate Recovery Program. Learn more.