If Medicaid helps pay for your long-term care, it may be able to recoup costs by selling your home after you pass.
It is common for people applying for nursing home care or similar assistance to worry about what might happen with their home. Medicare cannot take your home, since it does not help pay for long-term care. However, whether Medicaid can take your home is a more complex question, with different answers depending on your specific situation. Below, we go into more detail on the Medicaid Estate Recovery Program and different scenarios that impact whether Medicaid can take your home.
What is the Medicaid Estate Recovery Program?
Every state and the District of Columbia have Medicaid Estate Recovery Programs (MERPs). Simply put, a MERP tries to recoup the long-term care costs the state paid for following the death of a Medicaid recipient aged 55 years or older.
After the passing of the Omnibus Budget Reconciliation Act of 1993, MERPs became mandatory. Estate recovery is also mandatory after the death of Medicaid recipients under 55 if they received nursing home care.
The state attempts reimbursement through the deceased's remaining estate, with the home often being the only remaining asset of value. Most states have a limited time wherein they can file for estate recovery, usually within a year of the Medicaid recipient's death. However, program rules are not universal across states, and some operate on different timelines.
Regardless, if the deceased has a blind or otherwise disabled child, child under 21, or surviving spouse, Medicaid cannot attempt to reimburse costs via estate recovery. You can learn more about Medicaid Estate Recovery Programs here.
When can Medicaid take your home?
It is important to note that estate recovery usually applies only when Medicaid covers your long-term care costs, not just if you have Medicaid. Again, if the deceased has a child under 21, child with a disability, or surviving spouse, Medicaid cannot take the home. It is a good idea to file an "Intent to Return" home statement that indicates you intend to move back home if possible, as this makes the beneficiary's home an exempt asset while they are living.
Here we discuss the scenarios that impact whether Medicaid can take your home.
What happens when you're single
If you are single and pass, with no underage (under 21) children or children with disabilities living in the home, Medicaid can try to use a home sale to recoup the money spent on long-term care. But, as stated above, if you do have a minor child or child with a disability living in the house, the state cannot reimburse costs with estate recovery.
However, if your grown child (over 21) lives at home and does not have a disability, the home is not an exempt asset. In this case, a home equity limit would apply in all states except California, with the limit based on the state you live in.
There is also the Child Caregiver Exception which, under certain circumstances, allows Medicaid beneficiaries to transfer their house to their adult child. You may also get a Sibling Exemption that allows you to transfer your house to a sibling who is part owner of the house, provided they lived there for at least a year before you went to a Medicaid-funded nursing home. Both must be done correctly, otherwise you risk violating the "Look-Back Period".
What happens if you're married
What happens to your home if you are married depends on your exact situation. If one spouse moves into a nursing facility and the other remains at home, the one at home is considered the "community spouse" and is entitled to the house.
It is best to have only the community spouse's name on the title, which can be transferred to them without violating the Look-Back Period since they are the non-applicant spouse. If the house is not solely in their name, it is still safe from MERPs after the spouse in the nursing home has passed away, but not after the community spouse has passed away.
Transferring the title to the community spouse entirely is the best way to protect your house from estate recovery.
If the spouse living at home has passed, and the spouse in a nursing facility has not filed an Intent to Return, Medicaid can sell the home. Proceeds from the sale would also most likely make the surviving spouse ineligible for Medicaid, with the sale having to cover the cost of a new nursing facility until funds were spent down to the Medicaid asset limit. Then, they could reapply for Medicaid. If your spouse dies without a valid will and the house is then passed to you, the same process will apply.
What happens when both spouses have passed
This is another scenario in which it could go a number of ways.
If both spouses have passed, and both were Medicaid recipients, the state will try to recover funds. If the Medicaid-recipient spouse passes away first, it depends on your state whether they will attempt estate recovery. If the non-Medicaid spouse passes first, the state will attempt estate recovery.
If grown children live in the home, and the title was not transferred to them through the Child Caregiver Exemption, the state will try to collect via estate recovery. Remember, if an underage child or child with a disability lives in the home, estate recovery is prohibited.
What if you have Medicaid and want to sell your house?
While you can sell your home if you have Medicaid, you do risk making yourself ineligible for Medicaid by doing so. Once the home is sold, it is no longer exempt, and any proceeds would count toward your asset limit (typically $2,000). This almost always puts you over the asset limit and you cannot reapply for Medicaid until you have spent down.
Gifting money from the sale of the home to get back to Medicaid eligibility limits violates the Look-Back Period rules and can result in a penalty period that keeps you ineligible for Medicaid even after you have spent back to the asset limits.
How you can protect your home
So, beyond what we've outlined above, what steps can you take to protect your home?
In addition to the exemptions mentioned, placing your home in an irrevocable trust is a way to protect your house. The terms of the trust cannot be changed, the trust maker no longer owns the assets, and the trustee manages the trust itself. However, this type of trust violates the Look-Back Period, so it must be done at least 60 months prior to applying for long-term care (30 months in California). If a community spouse establishes the trust, then no Medicaid rules are violated.
It is also important to keep your assets out of probate, the legal process of determining the value of the deceased's assets, paying any remaining taxes, and will validation. Keeping your home out of probate keeps it safe from estate recovery. If you have a life estate deed that automatically transfers ownership of the home to someone else upon your death (commonly known as a Lady Bird Deed), that will keep your home from going through probate.