Definition: Medicaid Sibling Exemption

The Sibling Exemption, also called the Sibling Exception, allows seniors to transfer their primary home to their brother or sister without jeopardizing their Medicaid eligibility (given specific criteria is met). In other words, it allows one to transfer their home to their sibling without being denied Medicaid or losing their Medicaid coverage.

Medicaid has a 60-month Look-Back Period, during which Medicaid reviews all asset transfers immediately preceding one’s Medicaid application for long-term care. Intended to discourage assets from being gifted (including sold for under fair market value) to meet Medicaid’s asset limit, “disqualifying transfer(s)” during this period are penalized with a period of Medicaid ineligibility. Transferring one’s home, with very few exceptions, such as the Sibling Exemption, is a violation of Medicaid’s Look-Back Rule. Even after Medicaid approval, one can violate the “look back” if they transfer assets, like one’s home, under fair market value.

Transferring one’s home via the Sibling Exemption protects the home from Medicaid’s Estate Recovery Program (MERP). Via MERP, a state’s Medicaid agency attempts to be reimbursed its costs following the death of a long-term care Medicaid beneficiary. If the deceased’s home has been transferred to their sibling, there is no home available to Medicaid from which they can be reimbursed.

How Does the Sibling Exemption Work?

The following criteria must be met to qualify for the Sibling Exception:

1) The sibling must have an equity interest in the home. This means they are part owner of the home, with the siblings sharing ownership. Proof of equity interest might include a deed (a legal document) indicating ownership, cancelled checks / money orders showing payments for mortgage and / or utilities and / or taxes, or proof of payments for home upkeep / improvements. Based on the state, proof of equity interest may vary. For instance, in New York, equity interest is defined by the ability to receive a portion of the proceeds if the home were to be sold. Evidence of this is the individual’s name on the property title.

2) The sibling must have lived continuously in the home for a minimum of one year immediately preceding the institutionalization of the other sibling.

The term “institutionalized” can be misleading. While it does encompass persons who are nursing home residents and persons residing in a medical treatment facility who require a Nursing Facility Level of Care, it also often includes persons who receive Home and Community Based Services (HCBS) via a 1915(c) HCBS Medicaid Waiver. This means that the individual may continue to live at home with Medicaid-provided long-term services and supports. Persons may also live in an adult family care home (adult foster care) or an assisted living residence.

When the above conditions are met, the full title of the home can be transferred to the non-institutionalized sibling, giving that sibling full ownership of the home without jeopardizing the other sibling’s Medicaid eligibility. The home can be transferred before or after Medicaid eligibility has been established. Either way, if all the conditions of the Sibling Exemption have been met, the transfer of the home will not impact Medicaid eligibility. Commonly, it is via a Quitclaim Deed that the home is transferred.

A sibling can be a biological or adopted sibling of any age. It is unclear if a step-sibling qualifies.

Are there Monetary Limits / Maximums to the Home’s Value?

While all states have a home equity interest limit for long-term care Medicaid eligibility (Nursing Home Medicaid or Home and Community Based Services via a Medicaid Waiver), there is no home equity limit when a home is transferred to a brother or sister via the Sibling Exemption. Home equity is the value of one’s home minus any home debts, such as a mortgage. Home equity interest is the amount of home equity that is owned by the Medicaid applicant.

It is thought that the Sibling Exemption does not set a minimum home equity interest requirement for the non-institutionalized sibling. However, it is recommended one consult with a Medicaid Planning Professional in their state for confirmation.

Are the Sibling Exemption Rules the Same in All States?

While there are no substantial differences between states in regards to the Sibling Exemption, there may be slight variations based on the state. As mentioned above, NY requires that the brother or sister be named on the property title, and therefore, would receive a portion of the proceeds if the home were sold. Prior to transferring a home to a sibling, one should verify the rules for this exemption in their state. Without the proper knowledge, one may unknowingly make a disqualifying transfer, jeopardizing their long-term care Medicaid eligibility.

Is the Sibling Exemption a Feasible Medicaid Planning Strategy?

Yes, although not necessarily used frequently, the Sibling Exemption can be used as a Medicaid planning tool. As mentioned above, for this strategy to work, a Medicaid applicant’s sibling must share ownership of the applicant’s primary home and lived there for a minimum of one year immediately preceding the applicant’s ‘institutionalization”. Recall that this not only includes Medicaid-funded nursing home care, but often also Home and Community Based Services.

This strategy works best for siblings who already live together, have lived together for over a year, and the applicant sibling will require “institutionalization” in the near future. In this case, the applicant sibling can deed 1% ownership of their home to their sibling (fulfilling the requirement of shared ownership), and as long as the sibling pays fair market value for the 1%, it does not violate Medicaid’s Look-Back Rule.

If the siblings do not already live together in the home, or have not lived together a full year, they must live together for at least one year immediately prior to their sibling’s “institutionalization”. This would require careful planning, as we cannot always plan for when a sibling will require that level of care.

Is Professional Assistance Needed in Order to Utilize the Sibling Exemption?

It is always best to seek the counsel of a Certified Medicaid Planner prior to transferring one’s home to a sibling. While the Sibling Exemption may sound fairly straightforward, one runs the risk of long-term care Medicaid ineligibility if the criteria and rules in one’s state are not followed. Find a Certified Medicaid Planner.