How the Child Caregiver Exemption Preserves a Home as Inheritance and Helps with Medicaid Qualification

Summary
By providing care to an aging parent while residing in the parent’s home, an adult child can use the Child Caregiver Exemption to transfer ownership and protect the home from the Medicaid Estate Recovery Program. This exemption can also help a Medicaid Long Term Care applicant meet the relatively low asset limit for Medicaid financial eligibility.

What is the Medicaid’s Child Caregiver Exemption?

The Child Caregiver Exemption, also known as the Caretaker Child Exception and the Adult Child Caregiving Exemption, enables an older person to transfer their home to a qualified adult child without violating Medicaid’s Look-Back Period. The adult child is qualified if they have lived in the Medicaid applicant’s home for at least two years prior to the applicant needing Medicaid Long Term Care. Usually this means moving to a nursing home for full-time care, but it can also mean using receiving long-term care at home or in an assisted living facility. In addition, the adult child must have also provided a certain level of care for their parent during those two years in order to qualify for the Child Caregiver Exemption.

Look-Back Period

With the Look-Back Period, Medicaid “looks back” into an applicant’s financial records for the five-year time period prior to their application date to make sure they did not give away their assets, or sell them below a fair market rate, to get below the asset limit  and become financially eligible for Medicaid. The asset limit for an individual in most states in 2024 is $2,000.

Normally, transferring a home would violate the Look-Back Period. That’s not the case with the Child Caregiver Exemption, as long as the adult child of the applicant qualifies, the home will no longer count against the asset limit for their parent. Click here to learn more about the Look-Back Period.

Estate Recovery Program

The Child Caregiver Exemption also keeps the home safe as a family legacy by protecting it from the state’s Medicaid Estate Recovery Program (MERP). Every state and Washington, D.C., has a MERP that is legally obligated to try and collected reimbursement for Medicaid services received by an individual after that individual’s death. In many cases, reimbursement comes from the Medicaid recipient’s home, but if the Child Caregiver Exemption has been used the home is safe because it no longer belongs to the Medicaid recipient, it belongs to their qualified adult child.

Child Caregiver Exemption Key Terms Defined

Knowing how Medicaid defines the following words in regards to the Child Caregiver Exemption is critical to understanding the exemption and its rules:

• Child – Must be a biological or adopted child of the Medicaid applicant / recipient. Stepchildren, foster children, grandchildren, son-in-laws, daughter-in-laws and other family members are not eligible for the Child Caregiver Exemption.
• Home – Is defined as the primary residence of the Medicaid applicant / recipient. This can include single-family homes, condominiums, mobile homes and multi-family homes, as long as the parent and child are housed in the same building. Summer homes, vacation homes or any other secondary residences do not qualify as homes for the Child Caregiver Exemption.
• Care – The adult child must provide a level of care that allows their parent to live at home rather than needing Medicaid-covered, long-term care in a nursing home, an assisted living or at home in order to be eligible for the Child Caregiver Exemption. The care provided by the adult child includes things like monitoring medications, preparing meals, bathing, dressing, using the bathroom, getting in and out of bed, accompanying them to medical appointments and, in general, ensuring the health and safety of their parent.

Documents Needed for the Child Caregiver Exemption

Not only does the adult child and the home have to meet the qualifications mentioned above for the Child Caregiver Exemption to work, there must be documented proof of those qualifications.

• Proof of relationship – A birth certificate or adoption certificate is needed to prove the parent-child relationship.
• Proof of residency – The adult child must prove they have been living at the same address as their parent for two years with documents like a driver’s license, insurance policy, tax return, utility bills, voter registration card, etc. Affidavits (written statements signed under oath) from neighbors or family members can also be used to prove residency.
• Proof of care – The adult child must prove they provided care that helped prevent their parent from needing Medicaid-covered long-term care. This can be done with a signed statement from the parent’s physician that details why the aging parent needed care, what type of care they needed, how long the care was administered, that the adult child was the person providing the care and that without that care the parent would have needed to live in a nursing home. The adult child caretaker should also keep a daily log of all the care they provided their parent. If the adult child also worked outside of the home, they will need proof that their parent was cared for (at an adult day care, for example) during their time out of the home. Affidavits from relatives and neighbors maybe also be used for proof of care.

Home Transfer Options

There are two ways that a parent can transfer their home to their adult child when it comes to the Child Caregiver Exemption – Outright Transfer and Retaining a Life Estate.

With an Outright Transfer, the parent grants full ownership of the house to the caregiving adult child and all the rights that go along with ownership. When Retaining a Life Estate is used, the parent maintains the right to live in the home for the duration of their life, but the home will still be considered an exempt asset for Medicaid eligibility purposes.

Child Caregiver Exemption and the 3 Types of Medicaid Long Term Care

There are three type of Medicaid Long Term Care relevant to seniors – Nursing Home Medicaid, Home and Community Based Service (HCBS) Waivers , and Aged, Blind or Disabled (ABD) Medicaid. All three types have asset limits for eligibility, and beneficiaries of all three types are subject to Medicaid Estate Recovery, so the Child Caregiver Exemption could be used with all three types.

The Child Caregiver Exemption may factor in less when it comes to eligibility for HCBS Waivers or ABD Medicaid because in those cases the Medicaid recipients will usually be living in their home, which makes the home exempt from counting against the asset limit as long as it’s under the state’s home equity interest limit for HCBS Waiver applicants (the home equity limit doesn’t apply to ABD Medicaid beneficiaries). Click here to learn more about home equity limits and how home ownership impacts Medicaid Long Term Care eligibility.

However, the Child Caregiver Exemption could still be of value for HCBS Waivers or ABD Medicaid recipients and their families because it will protect the home from the state’s Medicaid Estate Recovery Program (MERP) after the Medicaid recipient’s death. As mentioned above, every state has a MERP that is legally obligated to try and collect reimbursement for any Medicaid benefits an individual received after that individual’s death. Most often that reimbursement comes from the Medicaid recipient’s home, but that can’t happen if the HCBS Waivers or ABD Medicaid recipient has been living at home, receiving qualifying care from an adult child and has enacted the Child Caregiver Exemption because the home would legally belong to the caregiving adult child.

ABD Medicaid does not have a Look-Back Period, so ABD Medicaid applicants could simply transfer their home to an adult child (or anyone else) without using the Child Caregiver Exemption to get under the asset limit without violating the Look-Back Period and to protect the home from estate recovery. However, ABD Medicaid recipients may eventually need Nursing Home Medicaid or HCBS Waivers, and a home transfer without an exemption would make them ineligible for either program if they did it within the Look-Back Period.