In a previous article we addressed the state Medicaid recovery programs and how they typically go after the only remaining asset which is the home. In this article we will discuss some of the strategies that can be used to protect the home from Medicaid estate recovery. There are a number of strategies that can be used. In those states that go after probate property only, anything that keeps the house out of probate will suffice. In other states, some common strategies include the use of irrevocable trusts or transfers before death.

Most of these strategies involve giving away ownership of the home. This creates a penalty either for a potential Medicaid application or for someone already on Medicaid whose name was on the property. There are also a number of strategies to deal with this penalty. The reason for creating a penalty through an outright gift or a trust is to start the five-year look back. Another reason might be to get the property out of the name of an aid and attendance applicant.

Transfer of the property as a gift, thereby creating a penalty, can be reversed in almost every state. In other words, if the consequences of a Medicaid penalty outweigh the advantages of gifting the property, the title is changed back into the name of the Medicaid beneficiary in order to allow that person to receive Medicaid benefits. In case the Medicaid beneficiary is incapacitated, a proper durable power of attorney that includes gifting rights must be set up in advance while the person was competent to do this.

Sell the House and Use Half a Loaf

Selling the house is generally only an option if a spouse or another member of the family does not need to live there. Selling the house might be an option for a single Medicaid beneficiary. Read more