Protecting Your House Before or After You Move Into a Nursing Home

Generally, you do not have to sell your home for Medicaid qualification of nursing home care. However, the state can file a claim against your home after your death. If Medicaid pays for your nursing home care, the state must attempt to recoup from your estate the amount it paid for your care. This is called "estate recovery." Consequently, with the rules for Medicaid eligibility i.e. assets under $2,500 the only property of substantial value that a Medicaid recipient is likely to own at death is their home. Therefore, you should consult with an elder care attorney before or after entering a nursing home, to discuss strategies to protect your home and dispel the Medicaid Myths and more Myths.

In those states that have implemented the Deficit Reduction Act of 2005, i.e. Maryland, the home is non countable asset for Medicaid eligibility purposes if your spouse or another dependent relative lives there.

Transferring a Home
In Maryland, transferring your house to your children (or someone else), within five years of entering a nursing home, will lead to a Medicaid penalty period. Therefore, you are ineligible for Medicaid for a period of time, depending on the value of the home. However, there are some circumstances in which you may transfer a house without incurring a transfer penalty:

  • Your spouse
  • A child who is under age 21 or who is blind or disabled
  • Into a trust for the sole benefit of a disabled individual under age 65 (even if the trust is for the benefit of the Medicaid applicant, under certain circumstances)
  • A sibling who has lived in the home during the year preceding the applicant's institutionalization and who already holds an equity interest in the home
  • A "caretaker child," who is defined as a child of the applicant who lived in the house for at least two years prior to the applicant's institutionalization and who during that period provided care that allowed the applicant to avoid a nursing home stay.

While you can sell your home for fair market value, it may make you ineligible for Medicaid, as you have exceeded $2500. Therefore, the proceeds of the sale for your home are applied to your nursing home bills, until you are below the $2,500. However, we can save a portion of the home proceeds by a strategy called “Gift and Return.”

Lien on Home
Generally, the state will place a lien on your home for the amount of money they spent on your nursing home care. However, if you sell the home while you are still alive, must satisfy the lien, by paying the state the lien amount. The exceptions to this rule are cases where a spouse, a disabled or blind child, a child under age 21, or a sibling with an equity interest in the house is residing there.

Estate Recovery
If your spouse, a disabled or blind child, a child under age 21, or a sibling with an equity interest in the house, resides in the home, the state cannot file a claim against the home for reimbursement of Medicaid nursing home expenses. However, once your spouse or dependent relative dies or moves out, the state can try to collect.

But there are some circumstances under which the value of a house can be protected from Medicaid recovery. The state cannot recover if you and your spouse owned the home as tenants by the entireties or if the house is in your spouse's name and you have relinquished your interest. If the house is in an irrevocable trust, the state cannot recover from it.

In addition, some children or relatives may be able to protect a nursing home resident's house if they qualify for an undue hardship waiver, or for example, if your daughter took care of you before you entered the nursing home, she may be able to avoid a claim against your house after you die.

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