Can I transfer my home to my child who lives with me and still get Medicaid?
The following case is a prime example of how a little bit of information can be a dangerous thing. Mom transferred her home to Linda 4 years ago. Mother and daughter had been living in the home for years. “Since I am living in the home isn’t it an exempt asset?” Linda asked. “Yes, it is,” I told her, “but that doesn’t mean Mom can transfer it to you.”
What Linda did is confuse the rules on exempt assets with the rules on transferring assets. If Mom needs nursing home care and applies for Medicaid, the State will not force the sale of the home if Linda has been, and continues to, live in it. In other words, it won’t require the sale proceeds to be spent on Mom’s care before it will approve her Medicaid application.
Keep in mind that if Linda lives there, she can’t use any of Mom’s income to pay for taxes, insurance and upkeep. That income must go to the nursing home. Linda must pay the expenses herself, but she can continue to live there. After Mom passes away the State will place a lien on the home to recoup the benefits it paid out during Mom’s life, but Linda can continue to live there (assuming she is the person who inherits the home from Mom) and the State will wait until the home is sold to be paid back.
Now, here’s where Linda made her mistake. She figured that if the home is exempt as long as she is living there, Mom can transfer ownership to her and still qualify for Medicaid at any point in time. That is incorrect. Transferring an exempt asset is still subject to the 5 year lookback and a potential Medicaid penalty.
If Mom’s house is worth $400,000, the transfer to Linda results in a potential penalty of 48 months. This means that if she applies for Medicaid now, 4 years after the transfer, she will be ineligible for Medicaid for 48 months. “Are there any exceptions to this rule?,” Linda asked.
“There are a few,” I told her. Next week we will share with you what they are.
For more information about Medicaid, you can gain free online access to the “Seniors’ Guide to Health Care Reform & Avoiding Nursing Home Poverty” which contains secret benefits revealed by the Affordable Care Act.
At the Estate Planning & Asset Protection Law Center of Dennis Sullivan & Associates, we help people and their families concerned with losing their homes and life savings to increasing medical and nursing home costs, taxes and the costs and time delays of probate. We also protect clients from losing control of their own health and financial decisions.
We encourage you to attend one of our free educational workshops to learn more about our process and what you can do to enhance the security of your spouse, home, life savings and legacy. To register for a seat at an upcoming workshop call (800) 964-4295 (24/7) or register online at www.SeniorWorkshop.com.