Medicaid is a means-tested program that provides healthcare coverage, including long-term care for those who qualify. When evaluating eligibility for Medicaid, the home of a married couple is often a critical asset. Here’s how Medicaid views a couple’s home and strategies to protect it from being consumed by nursing home expenses.

Medicaid and the Home

For Medicaid eligibility, a primary residence is typically considered an exempt asset under specific conditions:

1. Equity Limit: Medicaid imposes a cap on the equity value of the home, which varies by state (e.g., $713,000 in 2024). If equity exceeds this limit, the applicant may not qualify for Medicaid.
2. Primary Residence: The home is exempt if one spouse continues to live there or if the institutionalized spouse intends to return home.
3. Community Spouse Protections: If one spouse enters a nursing home while the other remains in the community, Medicaid treats the home as exempt to ensure the community spouse is not left impoverished.

Medicaid Estate Recovery

Although the home may be exempt during the Medicaid recipient’s lifetime, Medicaid’s Estate Recovery Program allows the state to recover long-term care costs from the recipient’s estate after their death. This includes the home if it is part of the estate.

Strategies to Protect the Home

1. Transfer Ownership to the Healthy Spouse

Under Medicaid rules, transferring the home to the community spouse is allowed without penalty. This ensures the home is not counted as an asset for Medicaid purposes. However, upon the community spouse’s death, the home may still be subject to estate recovery unless additional planning is done.

2. Utilize an Irrevocable Trust

Placing the home in an irrevocable Medicaid trust can protect it from being counted as an asset and from estate recovery. However, this strategy requires advanced planning because Medicaid has a look-back period of five years (or 60 months). Transfers made within this period may result in penalties.

3. Life Estate Deeds

A life estate deed allows the couple to retain the right to live in the home during their lifetimes while transferring ownership to a designated beneficiary (e.g., children). This ensures the home passes directly to heirs, bypassing probate and Medicaid estate recovery. However, this strategy must also account for the look-back period and should be used under certain circumstances.

4. Transfer to a Child Caregiver

If an adult child has lived in the home and provided care for at least two years, preventing the institutionalization of the Medicaid applicant, the home may be transferred to the caregiver child without penalty.

5. Consider Selling the Home

If neither spouse plans to return to the home, selling it might make sense. Proceeds can be used to pay for care, or through proper planning, excess funds can be spent down or converted into exempt assets.

Key Considerations

• Timing is Critical: Strategies like trusts or deeds must account for the Medicaid look-back period to avoid penalties.
• Professional Guidance: Medicaid rules vary by state and are complex. Working with an elder law attorney or financial planner specializing in Medicaid can ensure compliance and maximize asset protection.
• Spousal Protections: Medicaid’s spousal impoverishment rules ensure the community spouse can retain a certain level of assets and income.

By leveraging these strategies, couples can protect their home from nursing home expenses while ensuring Medicaid eligibility and preserving wealth for their heirs.