What Happens to My Home If I Go On Medicaid?

The home is one of the biggest assets you are allowed to own and still qualify for Medicaid coverage of your nursing home bills. Under recent federal law effective Jan. 1, 2006, the equity in your home will be completely exempt from counting against you for Medicaid eligibility purposes, if your equity does not exceed $500,000. (Under the federal law, each state has the option of adopting a higher exemption, up to $750,000.) In addition, if your spouse continues to live in the house, it will be exempt no matter how much it is worth.

But let's say your home is exempt, and you are in a nursing home. Must you sell your home? No, it will almost always remain exempt, even after you move into the nursing home, so long as you have the "intent to return." This intent can be expressed either by you (the person in the nursing home who is receiving Medicaid) or by a family member. Of course, if your spouse is living in the home, it will be exempt no matter what your "intent" may be.

But what if you're not married, and you're in a nursing home---who pays the real estate taxes, the homeowner's insurance, the heat and other necessary upkeep? The general rule is that you must turn over all of your income to the nursing home, before Medicaid will pay the balance of your nursing home bill. So generally, you cannot use your income to pay for these household expenses.

There is an exception for the first six months you are in the nursing home, if you can be reasonably expected to return home within this period of time. If such is the case, the federal rules permit you to deduct a limited amount each month to pay for certain house-related expenses, including rent or mortgage.

After the first six months, there are several options. First, your family members may have to pay these bills, to protect what they hope and expect will eventually pass to them following your death. Accurate records should be kept documenting who paid what and when, so that should they inherit the house as planned, everyone's share can be adjusted fairly based on what they paid in during your lifetime.

Second, you can rent out the house. This is often a good idea if family members simply do not have the cash to pay the real estate taxes and other monthly upkeep costs out of pocket. A local management company should be used to supervise the rentals and take care of emergencies (calling the plumber on a weekend, etc.). In truth, you should not be overly concerned as to the cost of such a company, since all of the net income from your rent simply goes to the nursing home anyway, saving the Medicaid program money, not your family! Accordingly, it would be better to charge a little less rent if that ensures a responsible tenant, since your goal is simply to cover the ongoing carrying costs of the house, not make a profit.

Finally, don't forget that there is little point in your family paying for the upkeep of the house if it will have to be sold to repay the state under the Medicaid "estate recovery" program following your death. See the other articles [like Medicaid Estate Recovery Rules and Medicaid Estate Recovery Planning] I've written on the estate recovery issue and what to do about it.

K. Gabriel Heiser is an attorney with over 25 years experience in elder law and estate planning. Heiser is the author of “How to Protect Your Family's Assets from Devastating Nursing Home Costs: Medicaid Secrets,” an annually updated practical guide for the layperson. For more information about this book, visit Medicaid Secrets.

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