How the Child Caregiver Exemption Preserves a Home as Inheritance and Helps with Medicaid Qualification
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 their parent’s home from the Medicaid Estate Recovery Program. This exemption can also help a Medicaid candidate meet Medicaid’s asset limit for financial eligibility, which is $2,000 in most states for 2022.
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 rule. The adult child is qualified if they have lived in the Medicaid applicant’s home for at least two years prior to the applicant moving out of the home and into a nursing home or assisted living facility. In addition, the adult child must also provide a certain level of care for their parent during those two years in order to qualify for the Child Caregiver Exemption and to not break the look-back rule.
With the look-back rule, Medicaid “looks back” at the five-year period prior to the Medicaid application to make sure the applicant did not give away their assets, or sell them below a fair market rate, just to get below the asset limit ($2,000 in most states for 2022) and become financially eligible for Medicaid. California is more lenient when it comes to this rule and only looks back 30 months instead of five years. Normally, transferring a home would violate the look-back rule. 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.
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
It is important to understand exactly what is meant by the following terms when they are used to explain the Child Caregiver Exemption 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 a nursing home or assisted living facility in order to be eligible for the Child Caregiver Exemption. This includes 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 keep their parent out of a nursing home or assisted living facility. 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, 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 – Nursing Home Medicaid, Home and Community Based Service (HCBS) Waivers , and Aged, Blind or Disabled (ABD) Medicaid, also known as Regular Medicaid. The most common type of Medicaid Long Term Care associated with the Child Caregiver Exemption is Nursing Home Medicaid because, in general, the elderly parent will be moving to a nursing home after being cared for by their adult child.
The Child Caregiver Exemption often doesn’t factor in 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. However, if an HCBS Waivers or ABD Medicaid applicant or recipient has been living at home and receiving care from an adult child but is moving out of that home and into an assisted living facility, the Child Caregiver Exemption could apply.
More importantly, the Child Caregiver Exemption could be useful 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 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.