Medicaid Planning: Is Your Home Protected?

Whitney Gagnon Headshot
Whitney A. Gagnon
Director, Trusts & Estates Department
Published: Portsmouth Herald
September 1, 2019

As our population ages at increasing rates and individuals continue to live longer, shared concerns about the costs of long-term care become more common. The majority of our population will require long-term care in their lifetime. A significant question among those facing these matters is, “If my spouse requires long-term care in a nursing home and Medicaid benefits to finance such care, will I be able to continue living in my home or is my home at risk?” In general, a primary place of residence is considered an excluded resource and protected for Medicaid purposes, allowing the spouse at home to continue residing in the home without affecting the other spouse’s access to necessary long-term care services and supports.

Medicaid is a joint federal and state health insurance program that provides public benefits to individuals in need, and it is the largest payer for long-term care costs. To be eligible for Medicaid an individual (and the individual’s spouse) must meet certain financial eligibility criteria.

Not all assets are included in the determination of an individual’s (or couple’s) assets for Medicaid financial eligibility purposes. For example, a primary residence (with an equity value of less than $585,000 in 2019) is considered an excluded asset for purposes of determining Medicaid eligibility if your spouse is living in the home. This rule is one of several protections offered to married couples in an effort to further the well-being of both spouses. The Medicaid regulations are complex and oftentimes it is necessary to take further action in order to benefit from the protections provided.

Even if your home is considered an excluded resource, it may be necessary to change the ownership of your home from joint ownership to solely in the name of your spouse at home to avoid the right of the state to place and/or enforce a lien against your home. Such a change in ownership would also ensure that your spouse at home is permitted to retain all of the sale proceeds in the event your home is sold in the future. In addition, if your home is held in a revocable trust it would be necessary to change the ownership and remove your home from the trust.

In addition to protections provided to your spouse, a home is considered an excluded asset if you have a minor child or a child with disabilities living in the home. If you are not married and it is expected that you will return home in the future, your home is similarly excluded. Further, if your home is jointly owned and the co-owner is unwilling to sell the home, your home is excluded. If you own rental property and the rent is sufficient to cover the costs associated with maintaining the property, your property is excluded.

Although you could be disqualified if you transfer or gift assets for less than fair market value five years prior to applying for Medicaid, there are circumstances in which you would be permitted to transfer assets without causing a disqualification period. One type of permissible transfer allows you to transfer your home to a child who lived with you in your home for at least two years prior to your move to a nursing home or other medical care facility if the child provided care to you that permitted you to continue to live at home rather than in a facility.

Another type of permissible transfer is to a sibling who has an equity interest in the home and who resided in the home for at least one year prior to your move to a nursing home. In addition, you may transfer assets directly to a child who has certain disabilities or to a special needs trust for the benefit of an individual with disabilities. The primary purpose of a special needs trust is to provide supplemental funds for the benefit of an individual with disabilities for use in enhancing the individual’s quality of life without adversely affecting the individual’s financial eligibility for public benefits.

A Medicaid plan should be structured based on your health care wishes and estate planning objectives, ensuring that you maintain assets that you might need or want in the future, and in compliance with the technical Medicaid regulations. As with any planning scenario, the tax consequences of a Medicaid plan should be considered in order to avoid adverse income taxes or loss of carry-over basis for capital gains tax purposes. Elder law and special needs law attorneys serve as advocates for elderly individuals and individuals with disabilities in order to achieve your goals and protect your rights.