Many government benefits programs, such as Medicaid, have eligibility requirements that are based on the applicant’s income. Income-based programs have income or asset limits that must not be exceeded in order to qualify. Although you do not have to be “impoverished,” your income and assets must be low enough to meet the established limits. Clients commonly ask, “can Medicaid take my home?” The answer is yes and no.
Your home is exempt property when qualifying for Medicaid
Your home, or primary residence, is never considered a countable asset by Medicaid. The rule is, as long as you intend to return home or your spouse or other dependents still live in the home, it cannot be counted as an asset. This is true regardless of whether it seems likely you will not be able to return home. So, in nearly all cases, nursing home residents are not required to sell their home in order to qualify for Medicaid. However, upon your death, if you still have an interest in that home, it may be fair game.
Medicaid Estate Recovery
Medicaid is not a reimbursement program. Instead, Medicaid pays health care providers and facilities directly for the services they provide to you. In return, Medicaid programs are required to recover certain Medicaid benefits by seeking recovery of payments from your estate. This means that, if your home is owned by both you and your daughter, at the time of your death, Medicaid may be able to make a claim against your 50% interest in the house.
Be careful transferring assets before applying for Medicaid
With this in mind, many people attempt to transfer their homes and other valuable property into the names of relatives, and out of the reach of Medicaid. Unfortunately, this is not a good idea. The misconception is that if you do not have property in your name at the time you apply for Medicaid, you will not be required to liquidate that property in order to meet the income threshold. While this may be true theoretically, selling or transferring your property before applying could result in a long delay of benefits.
If you give away any of your property or assets shortly before applying, you may be ineligible for long-term care benefits for a five-year period after your application is accepted. This is often referred to as the Medicaid “Five-Year Look Back” Rule. The Medicaid agency will scrutinize all transfers you made during the five years prior to your application, no matter how well-intentioned they may have been. This rule is meant to both discourage and penalize individuals for giving away property just prior to applying for Medicaid.
However, the penalty period is applicable only to individuals needing long-term care in an institution, or who receive home health care. If you need acute care, including hospital or physician services, you will still be eligible to receive those benefits.
If you have questions regarding Medicaid eligibility, or any other Medicaid planning concerns, please contact Sexton, Bailey Attorneys, PA online or by calling us at (479) 443-0062.