Medicaid is a state and federal program which pays medical costs for low-income adults with or without children. Medicaid also covers people aged 65 and older, blind or disabled, or pregnant and cannot pay their medical bills.
However, most people do not realize that Medicaid also pays for nursing home care as well. For seniors who require long-term care and meet the financial eligibility criteria, Medicaid has a program which covers long-term care and pays for almost 100% of their nursing home costs.
To qualify for Medicaid, you must have under a certain amount of non-exempt assets. In 2020, in Illinois, for example, to qualify for Medicaid long-term care benefits, applicants must have less than $2,000 worth of non-exempt assets. As an elder law attorney, one of the biggest questions I am faced with when helping individuals with Medicaid planning, is “can I keep my house?” And in typical attorney fashion, the answer is, “It depends.”
In this article, we are going to discuss situations in which you can keep your home while remaining eligible for Medicaid.
Homestead Property
If a Medicaid applicant applying for long-term care benefits to pay for nursing home care has a “homestead property”, i.e. their home, it will be regarded as an exempt asset under the Medicaid rules as long as it is occupied by the applicant, the applicant’s spouse or the applicant’s minor, disabled or blind child.
The home will also be regarded as an exempt asset when the applicant intends to return to the home from a nursing home or medical institution. The Federal Medicaid guidelines use a subjective standard in making this determination and the house will be exempt as long as the applicant expresses an intent to return home.
If the Medicaid applicant does not intend to return to their home, it can still be exempt as homestead property if it is occupied by either:
- The person’s spouse;
- A dependent sibling of the person;
- The person’s child under age 21 or the person’s adult child who has a disability; or,
- The person’s son or daughter who provided care to the person and resided in the home for the two years immediately before the person moved to the long-term care facility.
However, if the Medicaid applicant abandons homestead property without the intent to return, the property becomes non-homestead property and will be considered a non-exempt asset.
Another important point to remember is that the Medicaid applicant’s income cannot be used to maintain this home; that must be transferred directly to the nursing home (some exceptions are made for spouses.) If the occupant cannot afford to maintain the home, that should be a factor in a discussion of whether the home needs to be sold.
Transferring Homestead Property
Be careful if you are considering transferring your home as a gift to avoid it be counted as an asset. Medicaid treats the transfer of the applicant’s home like any other asset and you may incur a penalty making you ineligible for Medicaid for a period of time.
Medicaid provides a five-year “lookback” period in determining whether the applicant transferred assets for less than fair market value. The timing of the transfer and when the applicant applies for Medicaid are also very important.
If done correctly, the applicant may be able to transfer the home to the following classes of people without incurring a penalty:
- The applicant’s spouse;
- The applicant’s minor child or disabled adult child;
- A sibling with an ownership interest in the home who has been living in the home for at least one year before the applicant went to a nursing home; or,
- An adult child with no disabilities who has been living in the home for at least two years prior to the applicant going to a nursing home, AND, who cared for the applicant, allowing the applicant to live at home rather than in a nursing home.
It is important to reiterate that transferring your home to the above individuals does not guarantee the transfer will be exempt from Medicaid consideration. If Medicaid finds that the transfer was done solely for the purpose of making the applicant eligible for Medicaid, it may be counted as an asset and you may incur a penalty. A Medicaid Planning attorney or benefits specialist is essential to ensure your application is done correctly and your assets are properly titled to better your chances of approval.
While this article is meant to provide general information about Medicaid asset exemptions, these rules are not absolute and should not be construed as legal advice. If you have questions about Medicaid, Medicaid Planning or asset exemptions, it is important to contact an experienced Medicaid or elder law attorney in your area.
Lauren Kaplan is an attorney at The Law Office of Kate Curler LLC in Chicago who focuses her practice on estate planning and elder law. If you have questions about Medicaid, estate planning, or elder law, please contact Lauren at lkaplan@curlerlaw.com or (312) 952-1077 for a free consultation.