Under the current laws in most states, a senior’s personal residence will not be counted as an asset in determining their financial eligibility for Medicaid coverage of long-term care costs—even after they move into a nursing home.
However, if a senior is single and their equity interest (fair market value minus debts like a mortgage) in their primary residence exceeds a certain amount, then the house will be counted as an asset, almost certainly causing them to be disqualified from Medicaid coverage. In 2022, the minimum home equity limit that states can set is $636,000, but states with higher property values may use an increased limit of up to $955,000. California is the only state that does not set a value limit on long-term care Medicaid applicants’ primary residences.
In addition to equity value, there are several conditions that can impact whether Medicaid “counts” an elder’s home as an asset. Get the facts straight to ensure an aging loved one's primary residence is exempt for Medicaid eligibility purposes.
Medicaid-Exempt Home Transfers
Medicaid rules are different for married couples where only one spouse is applying for coverage of nursing home costs. If one spouse, known as the “community spouse,” continues to reside in the primary residence, then the home will continue to be exempt regardless of its value.
Another home exemption occurs if a senior’s minor dependent child, blind child or disabled child lives in the home. Again, there is no home value limitation in this case.
There is a child caregiver exemption as well. If an adult child lived in the Medicaid applicant’s home and cared for them for at least two consecutive years prior to the parent’s placement in a nursing home, then the home can be transferred to the caregiving child for a nominal value (less than fair market value). This transaction is not subject to Medicaid penalties. Note that this caregiving arrangement must be carefully documented (ideally through a formal care agreement) to prove that the requirements for the exemption have been met.
Lastly, an exemption may apply in certain situations where an applicant’s sibling is a part owner of the primary residence and lived there continuously for at least one year. Requirements and documentation for proving this exemption (and the others mentioned above) may vary by state.
Medicaid Coverage and the Intent to Return Home
What if a senior is single, moves from their home to an assisted living facility, but then their condition requires them to move into a nursing home? Will Medicaid still pay for their nursing home care and consider their former home exempt?
Unfortunately, no. Once a person moves out of their home of many years, it is no longer considered their “principal residence.” Making a permanent move to an assisted living facility is a clear statement that a senior does not plan to live in their community home again. At that point, it is considered a house rather than a home, so the exemption no longer applies. However, in some states the exemption can be continued for up to six or 12 months as long as the senior maintains a reasonable “intent to return” home. Once the intent to return is nullified, a home becomes a countable asset that can be used to pay for long-term care.
If a senior moves directly to a nursing home, the exempt status of their home still hinges upon their intent to return. Even if it is highly unlikely that they will ever improve enough to move out of the nursing home, expressing their intent to do so classifies their institutionalization as “temporary” and continues to protect their primary residence as an exempt asset.
Under federal law, if a senior cannot express this intent themselves, then their spouse, another relative, or their legal representative may express it for them. It is always a good idea to put one’s intent to return home in writing as soon as possible after entering a nursing home. Should it become necessary to document a senior’s intentions, there will already be written proof.
Home Ownership and Medicaid Planning
In summary, there are specific triggers that cause a Medicaid beneficiary’s home to lose its protected status. A previously exempt primary residence becomes a countable asset when the owner has no eligible spouse, dependent, sibling or child caregiver living there and:
- Moves into a nursing home or other medical institution permanently with no expressed intent to return; or
- Transfers the home for less than fair market value; or
- Dies.
The moral of the story is, if a senior moves from their home to an apartment, independent living community or assisted living facility, it’s important to consider selling their former principal residence and dealing with the proceeds in a manner that will best provide for their care long into the future.
Part of this plan may be to prepare for the eventuality of moving into a nursing home and the expenses this high level of care entails. If so, contacting an elder law attorney with Medicaid planning experience is crucial. You’ll need ample time to put a solid legal and financial plan in place and execute it before skilled nursing care is needed. The sooner planning begins, the more likely it is that an elder will be able to receive the care they need, whether it is paid for privately, by Medicaid or through some combination of the two.