Rules on How Home Ownership Impacts Medicaid Eligibility

Summary
Losing your home because you need Medicaid for long term care is a common worry for many people. Use our interactive “Can Medicaid Take My Home” tool to determine if your home is at risk. There are circumstances where an individual might have to sell their home to become eligible or to maintain their eligibility for Medicaid, or to cover some costs of long term care. However, there are also ways to keep the home protected. Losing a home after passing away is covered in a separate article here.

 

How Home Ownership Impacts Medicaid Long Term Care Eligibility

Owning a home can affect your Medicaid eligibility when you’re applying, while you are receiving benefits and after your death. This article will only cover the impacts of home ownership while the Medicaid applicant/beneficiary is living.

There are many requirements for Medicaid eligibility, including an asset limit, which is $2,000 for most states in 2022. If the home is counted against the asset limit, the Medicaid applicant would most likely be well over the $2,000 limit and would not be Medicaid eligible. However, there are several ways the home would be exempt and therefore not count against the limit. This allows the applicant to keep their home and be Medicaid eligible.

This asset limit still applies after an individual has been approved for Medicaid and is receiving benefits. So, if circumstances made the home exempt while applying, but then those circumstances change to make the home countable after the individual is receiving benefit, the home would most likely push the Medicaid beneficiary over the $2,000 asset limit and make them ineligible.

 

When a Home is Protected When Using Medicaid

There are many situations that will naturally occur for Medicaid Long Term Care applicants and beneficiaries that will keep their home exempt from the asset limit, such as when the beneficiary or their spouse continue to live in the home. If those situations don’t naturally occur, there are other ways to keep the home exempt.

 As an alternative to reading below, one can use our Interactive “Can Medicaid Take My Home Tool” to determine if their home is at risk or protected from Medicaid.

 

If the Medicaid Beneficiary Lives at Home

There are three types of Medicaid Long Term Care – Nursing Home Medicaid, Home and Community Based Services (HCBS) Waivers, and Aged Blind and Disabled (ABD) Medicaid. Many people who have HCBS Waivers or ABD Medicaid (also known as Regular Medicaid) will live at home, and that makes the home exempt from the asset limit, as long as it meets two other criteria.

The first criteria is that the home must be the primary residence of the Medicaid applicant/beneficiary. Vacation homes or other second homes will count against the asset limit. A primary residence doesn’t have to be a single-family home, it can be a condominium, a multi-family home, a mobile home or a houseboat, as long as it is the primary residence of the Medicaid applicant/beneficiary.

The second criteria is that the home must be under the Medicaid mandated home equity limit, which in 2022 is $636,000 or $955,000 (for states with higher property values) except in California, where there is no home equity limit. To be clear, home equity is not just the home’s value. It is the fair market value minus any debts (like a mortgage) owed on the home. For example, if a home has a fair market value of $750,000 and an outstanding mortgage of $200,000, the equity value is $550,000.

 

If the Spouse of the Medicaid Beneficiary Lives in the Home

If the Medicaid applicant/beneficiary is married and will move out of the home, but their spouse will remain living in the home, the home will be exempt and not counted against the asset limit for Medicaid eligibility. This happens most often with Nursing Home Medicaid applicants and recipients. However, it might also apply if an individual receiving an HCBS Waiver moves into a non-nursing home assisted living facility, like a residence for Alzheimer’s or dementia patients, but their spouse remains living at home.

The home must also be the primary residence of the spouse for it to be exempt in this situation, second homes or vacation homes cannot be exempt. But it’s important to note that the home equity limit does not apply when a spouse lives in the home. So the home could have an equity value above their state’s home equity limit (in most states in 2022, $636,000 or $955,000) and it would still be exempt if the spouse of the Medicaid applicant or recipient is living there.

 

If a Qualifying Child Lives in the Home

The home of a Medicaid applicant or recipient will not be counted against the asset limit if they have a child who is blind, disabled or under the age of 21 living in the home. The home must be the primary residence of the qualifying child in order for it to be exempt, but it does not need to meet any home equity limits.

 

Child Caregiver Exemption

This exemption allows a Medicaid applicant or beneficiary to transfer ownership of their house to a qualifying adult child to keep the home exempt from the asset limit without violating any Medicaid rules. In order to qualify, the adult child has to have lived in the home for at least two years before the applicant/beneficiary moves out, and during that time the adult child must have been providing a level of care that kept the applicant/beneficiary from needing to move to a nursing home. The adult child must be biological or adopted. Stepchildren, foster children, nieces, nephews and other family members are not eligible for this exemption.

There is no home equity limit when it comes to the Child Caregiver Exemption, so the home can have any value and still be exempt. This exemption only applies to primary residences, secondary homes or properties of any other kind can not be exempt.

The adult child will need to prove they have been living in the home as a primary residence and providing the necessary level of care. They can do this with appropriate documents, such as paid utility bills and signed doctor’s statements. If the adult child doesn’t have proof, or the state does not deem the proof or actions to be enough, transferring the home to the adult child would violate Medicaid’s look-back rule (more on that below) and make the applicant/beneficiary Medicaid ineligible.

 

Sibling Exemption

This exemption allows a Medicaid applicant or beneficiary to transfer ownership of their house to a qualifying sibling to keep the home exempt from the asset limit without violating any Medicaid rules. The sibling must have equity interest in the home, meaning they share ownership with the Medicaid applicant or beneficiary. They need to prove this co-ownership with documentation like a deed or canceled checks that have been used for mortgage payments or utility bills. The sibling must also be able to prove they have been living in the home for at least a year prior to the applicant/beneficiary moving out to be eligible for this exemption.

The sibling must be biological or adopted to be eligible for this exemption. Step-siblings or foster-siblings are not eligible. The Sibling Exemption only applies to primary residences, secondary homes cannot be exempt. But there is no home equity limit when it comes to the Sibling Exemption, so the home can have any value and still be exempt.

 

How Intent to Return Home Protects the Home

Even if no one is living in the home of a Medicaid applicant or beneficiary, the home can still be exempt from the asset limit if the applicant/beneficiary files an intent to return home. This is an official signed document stating that even though the Medicaid applicant/beneficiary is not currently living in the home, they still consider it their primary residence and they intend to return living there. Some states have standard intent to return forms, but there is no common form used across all 50 states.

Even if it’s unlikely the Medicaid applicant/beneficiary will actually return home, most states still honor the intent to return home statement and the home can stay exempt, but only for a limited amount of time. The time limit varies by state, but it is usually between six and 12 months. After that, the state will consider the move permanent, so the home will no longer be the primary residence of the applicant/beneficiary and it will count against the asset limit.

 

Using Trusts & The Look-Back Rule to Protect a Home

When someone applies for Medicaid, the state will look back into the last five years of their financial records to make sure they haven’t made any transactions that violate Medicaid’s rules. That includes not giving away any assets, like a home, to get below the asset limit. California is an exception and only looks back at 30 months of financial records.

Transferring a home to a spouse who is not applying for Medicaid Long Term Care and will continue to live in the home does not violate the look-back rule. The Child Caregiver Exemption and Sibling Exemption discussed above do not violate the look-back rule, either.

Medicaid Asset Protection Trusts
If it’s done in advance of the look-back period, a home can be protected with a Medicaid Asset Protection Trust. The Medicaid applicant/beneficiary would create the trust, place the home in it, and name a trustee who would take ownership of the trust/home immediately upon the death of the Medicaid applicant/beneficiary. This will keep the exempt from the asset limit, but it will violate the look-back period. So, these trusts are best used by people in good health who won’t need Medicaid long term care any time in the next five years.

 

What Happens if the Home Is Not Medicaid Exempt?

If none of these circumstances apply to you or your home, you may need to sell your home and “spend down” the assets to become eligible for Medicaid long term care. It’s a complicated process, but essentially the Medicaid applicant would make a plan to spend the money from the home sale on long term care costs until they get below the asset limit and then they would re-apply. This same “spend down” method can be used for a Medicaid beneficiary whose house becomes a countable asset while they are receiving benefits.