In most states- transferring your house to your children (or someone else) may lead to a Medicaid penalty period- which would make you ineligible for Medicaid for a period of time. However- there are circumstances in which transferring a house will not result in a penalty period.
One of those circumstances is if the Medicaid applicant transfers the house to a “caretaker child.” This is defined as a child of the applicant who lived in the house for at least two years prior to the applicant’s entering a nursing home and who during that period provided care that allowed the applicant to avoid a nursing home stay. In such cases- the Medicaid applicant may freely transfer a home to the child without triggering a transfer penalty. Note that the exception applies only to a child- not a grandchild or other relative.
Each state Medicaid agency has its own rules for proof that the child has lived with the parent and provided the necessary level of care- making it doubly important to consult with your attorney before making this (or any other) kind of transfer.
Others to whom a home may be transferred without Medicaid’s usual penalty are:
- Your spouse
- A child who is under age 21 or who is blind or disabled
- Into a trust for the sole benefit of a disabled individual under age 65 (even if the trust is for the benefit of the Medicaid applicant- under certain circumstances)
- A sibling who has lived in the home during the year preceding the applicant’s institutionalization and who already holds an equity interest in the home