My Spouse or I may be going to the Nursing Home: Will Medicaid Come for Our House?

Description of Medicaid Estate Recovery

Federal law allows states to recover money spent on behalf of the Medicaid beneficiary after that beneficiary’s death. Recovery concentrates on what Medicaid considers an “estate.” For most purposes, the only estate asset remaining at death is the personal residence.

In Texas, the definition of estate is expanded to include trusts or life estates and virtually any other property in which the deceased person had an interest. Typically, the state will wait until the last death in order to place a lien against the property. If a community spouse (the healthy spouse at home who is not receiving Medicaid) is living in the home, the state will wait until after he or she dies before applying its lien. HOWEVER: if the community spouse outlives the Medicaid beneficiary, the state will not attempt recovery at all and will simply ignore it

Further, in Texas, Medicaid recovery does not occur if the home is worth less than a certain minimum limit established by the state. Also, if recovery produces an undue hardship, no recovery occurs pending a “hardship hearing” with the state.

How Medicaid Views the Personal Residence

The State of Texas will allow the personal residence to be abandoned in favor of another living arrangement if the Medicaid beneficiary signs “an intent to return home.” There may be some long term restrictions on this intent, meaning that after a certain period of time some states may question whether the beneficiary really could return home and may require a doctor’s examination to verify this.

The rationale for this rule is based on the idea that if a Medicaid beneficiary in a facility gets better, he or she has a place to live in. In many cases, it is wise not to sell the home if it is vacant but to either rent it out and allow the rental income to subsidize the facility costs or to simply leave it vacant or to have a family member live there free of cost. Sometimes, the recovery on the house is not significant enough to warrant selling it or perhaps the house can be refinanced to take care of the Medicaid bill and allow the family to retain ownership of the property.

Medicaid — Transferring Ownership of the Personal Residence

For a single potential Medicaid beneficiary, transferring the ownership of the property to anyone other than the exempted individuals below will result in a penalty if Medicaid is applied for within five years of the transfer.

HOWEVER: There are certain cases where the home can be transferred to someone else and it does not create a penalty. Here are the exemptions.

  • transfer to the applicant’s spouse
  • transfer to a child who is under age 21 or who is blind or disabled
  • transfer into a trust for the sole benefit of a disabled individual under age 65 (even if the trust is for the benefit of the Medicaid applicant, under certain circumstances)
  • transfer to a sibling who has lived in the home during the year preceding the applicant’s institutionalization and who already holds an equity interest in the home
  • transfer to a “caretaker child,” who is defined as a child of the applicant who lived in the house for at least two years prior to the applicant’s institutionalization and who during that period provided care that allowed the applicant to avoid a nursing home stay. Evidence of the care and the effort to keep the applicant one of a nursing home must be provided.