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I often get asked the question, “Can I give away my home and qualify for Medicaid?” For the majority of people, the answer is typically “no.” Transferring the home without proper consideration is usually considered an improper transfer – resulting in an ineligibility period if done within the previous five (5) years before your Medicaid application.

There are, however, a few notable exceptions carved out by federal law.

A Medicaid applicant can transfer a home – without creating a penalty – to the applicant’s:

• Spouse;
• Child under 21;
• Child who is blind or permanently disabled, regardless of age;
• Sibling who is also a partial owner of the home and resided in it for one year before the applicant entered the nursing home; or
• Child who lived in the home for (2) years before the person entered the nursing home and provided care during that 2-year period which delayed entry to the nursing home.

While these are helpful exceptions to have, the following are the top five (5) mistakes people make when trying to use them:

1. FAILING TO LOOK AT THE FINE PRINT: The child-caregiver exception isn’t well defined by federal law, so states have taken to defining what it means to provide care – with some states being very specific. Specific can be good in that it gives you a guideline on what you need to qualify for the exception, except the average person rarely checks into these requirements.

For instance, in Ohio, to prove you’ve provided care, the applicant’s doctor has to sign an extensive form that certifies that the care was provided, that the parent needed the care the entire 2 years, and that the care delayed entry into the facility.

If you don’t keep the parent’s primary physician in the loop during the 2 years, they may not have enough information to complete the certification. If you change doctors or your doctor retires, it’s important to make sure there is a plan for contingencies.

2. DIFFICULTY PROVING RESIDENCY: States vary on how much detail they require to prove that a child or sibling actually lived in the home. Failing to actually live in the home as a primary residence will nullify the exception.

Some people try to get some mail sent to the home thinking that will be enough to prove residency; however, Medicaid will likely take a closer look. Be sure that your driver’s license shows the address as your principal address and that you file tax returns at the residence.

If you have more than one home, load up on proof that you lived with the parent or sibling; consider getting a library card and have your credit cards mailed to that address. Make it clear and unambiguous that the home was your principal residence during those 2 years.

3. THINKING MOM WILL MAKE IT 2 YEARS AT HOME: If your plan to protect the principal residence is to care for mom at home for 2 years and then put her in a facility, life can sometimes get in the way. A person with Alzheimer’s can often deteriorate quicker than you might expect.

Additionally, this strategy often runs afoul if the parent suffers a stroke that requires hospitalization and care in a facility. Children will often run themselves ragged trying to provide care during this timeframe thinking that free title to the home will be their reward, only to have the rug pulled out from underneath of them.

4. NOT FACTORING IN THE MORTGAGE: Dad want’s to deed you the house so it won’t be recovered against, but there’s a problem: Dad still owes $50,000 on the mortgage. To transfer a clean title, a mortgage has to be satisfied before the property can be gifted. The same is true of a home with a reverse mortgage.

Often by this time, the home has far more equity in it than mortgage. However, the exceptions only apply to transferring home title to a valid recipient. Failing to account for the mortgage or reverse mortgage can slow the process down and require that the child refinance – often a difficult thing to do. In a worse case, the deed cannot be transferred in time because the mortgage cannot be satisfied and the home is liened against by the state.

5. APPLYING FOR WAIVER BENEFITS: What if mom never goes into the nursing home but the state waiver program will provide her benefits at home? This could be a problem. The cost of HCBS waiver care at home is part of the estate recovery system. Medicaid payments for home care or assisted living care through waiver services rack up a bill that Medicaid can recover against at death. The child-caregiver exception makes it clear that the care provided had to delay entry into the nursing home, which it could do even though the parent never enters the nursing home. However, the 2-year living requirement is based upon the 2 years prior to the entry of the nursing home. Some states add the HCBS application and require a showing of 2 years of care prior to that date, but some states do not. If mom ever does end up in the facility and waiver care was used prior to entry, it could also eliminate the 2-year requirement because someone other than the child provided care in the 2 years before entry.

Are you working with advisors who know these rules and how to make the most of them? If not, you should be. Our team can help you with your Medicaid Planning cases by providing case design, case support, and a global insight on the best techniques to use given the circumstances. Our training and marketing programs can help you develop and grow your practice, while learning to maximize the value of each opportunity.

[1] 42 U.S.C. §1382b(c)(1)(C)(i)(I).

[1] 42 U.S.C. §1382b(c)(1)(C)(i)(II).

[1] 42 U.S.C. §1382b(c)(1)(C)(i)(II).

[1] 42 U.S.C. §1382b(c)(1)(C)(i)(III).

[1] 42 U.S.C. §1382b(c)(1)(C)(i)(IV).