How the Sibling Exemption Protects the Home and Helps with Medicaid Long Term Care Eligibility

The Sibling Exemption offers a way for Medicaid Long Term Care beneficiaries that co-own a home with their sibling who resides in the home to protect their home from Medicaid Estate Recovery Program. It can also help the Medicaid candidate to qualify by reducing their countable assets to an amount below the asset limit.


What is Medicaid’s Sibling Exemption?

The Sibling Exemption, also known as the Sibling Exception, enables an individual to transfer ownership of their primary home to a qualified sibling and maintain their Medicaid financial eligibility. The sibling (biological or adopted) is qualified if they have been living in the home for at least one year prior to the Medicaid recipient relocating to a nursing home or assisted living facility. The sibling must have an equity interest in the home. Equity interest for these purposes means the siblings share ownership of the home. A “home” in this case can be a single-family home, a condominium, a multi-unit (as long as the siblings both live there) or a mobile home. However, it must be the Medicaid recipient’s primary home, not a vacation or secondary home.

The Sibling Exemption also keeps the home safe as a family inheritance by transferring ownership from the Medicaid recipient, who is subject to the Medicaid Estate Recovery Program, to their qualified sibling.


Documentation Needed for the Sibling Exemption

Rules about the Sibling Exemption vary by state, but all states will require proof of home ownership. The sibling’s name on the deed or property title is the most straightforward form of proof. Some states also allow home ownership to be proven by canceled checks from mortgage payments, utility bills and home improvement or upkeep.

If the state requires proof of residency, the sibling can use a driver’s license, insurance policy, tax return, voter registration or some similar document that shows their address. Affidavits (written statements signed under oath) from neighbors or family members can also be used as proof of residency.


Benefits of the Sibling Exemption

There are two primary benefits when it comes to the Sibling Exemption. One is focused on Medicaid eligibility and the other is concerned with what happens to the home after the Medicaid recipient has passed away.


Look-Back Rule

The Sibling Exemption helps an individual to become, or stay, Medicaid eligible by allowing them to transfer their home without violating Medicaid’s look-back rule. This rule means the state Medicaid office will “look back” at the five-year period prior to the Medicaid application to see if the applicant gave away any of their assets, or sold them below a fair market rate, just to get below the asset limit ($2,000 in most states in 2022) and become, or stay, Medicaid eligible. California looks back 30 months rather than five years. In most situations, transferring a home would break the look-back rule, but that’s not the case when the Sibling Exemption is enacted.

 Other Protections: The Sibling Exemption this is not the only way a home is exempt from Medicaid’s asset limit. If the spouse of the Medicaid applicant/recipient will still live in the home it is exempt, or if the applicant is receiving Medicaid benefits outside of a nursing home and living in the home it is also exempt. There’s also the Child Caregiver Exemption, which is similar to the Sibling Exemption and allows a Medicaid recipient to transfer the home an adult child who has been living in the home and providing care for their parent. To be clear, a sibling does not need to provide care to the Medicaid recipient in order for the Sibling Exemption to be used, the sibling just has to share ownership and live in the home.


Medicaid Estate Recovery Program

There is a Medicaid Estate Recovery Program (MERP) in every state and Washington, D.C., that, after a Medicaid recipient has passed away, is legally obligated to try and collect reimbursement for any and all Medicaid benefits the deceased individual received. In many cases, reimbursement comes from the Medicaid recipient’s home, but the home is safe if the Sibling Exemption has been used because the home no longer belongs to the Medicaid recipient, it belongs to their sibling.


Sibling Exemption and the 3 Types of Medicaid LTC

There are three kinds 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 Sibling Exemption can be used with all three types of Medicaid Long Term Care, and it is useful in terms of protecting the home from the Medicaid Estate Recovery Program with all three types.

When it comes to Medicaid eligibility, the Sibling Exemption is mostly used for Nursing Home Medicaid when an applicant needs to get below the asset limit in order to qualify and happens to be living with their sibling. Using the exemption in this case allows the non-applicant sibling to keep living in the home and the applicant sibling to relocate to a nursing home. When it comes to HCBS Waivers and ABD Medicaid, the Medicaid recipient will usually live in the home while receiving their Medicaid benefits, which makes the home exempt and the Sibling Exemption a moot point in terms of eligibility.