Resources

What Will Medicare or Medicaid Pay For?

An individual with home equity of $500,000 or more is ineligible for Medicaid. Fortunately, the equity in a senior's home is exempt if a spouse or minor or disabled child resides in the home. Because a home with less than $500,000 of equity is a noncountable asset, a senior might be able to reduce countable assets by transferring value into the home, such as paying off outstanding home loans, buying a larger home, or paying for repairs or renovations. Payments from a reverse mortgage do not necessarily disqualify a Medicaid recipient, but any income must be spent in the month in which it is received; the remainder is considered a liquid asset. If at any time the recipient accumulates $2,000 or more in liquid assets, eligibility is lost.

Medicaid Look Back

A person cannot immediately qualify for Medicaid by transferring or gifting assets to someone else, such as a child[1] because there is a three-year look-back period for eligibility (up to five-year look back for some trusts). You should be aware of this look-back provision if you are selling to enter a nursing home and expect Medicaid to cover the expense.

[1] Medicaid allows transfer of the home without asset penalty to a spouse, a dependent child who is a minor or disabled, a sibling who has been living in the home and providing care for at least one year, or a child who has been living in the home and providing care for at least two years.

Medicaid Estate Recovery

When a Medicaid recipient dies, the state files a claim in probate court. Surviving heirs are not required to use their own funds to repay the debt owed to the state; however, if the home is subject to an estate recovery lien, the heirs may want to use their own funds to pay the Medicaid claim and keep the home. States are required to waive recovery of expenditures if it would result in undue hardship or impoverishment of the spouse or heirs; for example, when a family farm is the sole income-producing asset of the survivors.

Regulations on the use of Medicaid cost recovery vary widely from state to state. It is important for the real estate professional to be aware of state regulations when working with a client who anticipates selling a home before moving into a care facility and plans to apply for Medicaid benefits. The seller or family would also be wise to consult with an attorney specializing in elder care issues.