Can I Give My House to My Child and Qualify for Medicaid?

A common misconception is that you can't own your home and qualify for medicaid. So, people often will think they should give their home to their child and then apply for medicaid. This could be a bad idea and is probably not necessary.

-- By K. Gabriel Heiser, Attorney

It is certainly possible for a parent to sign a deed transferring complete title of the parent's home to a child. However, the parent should be very sure he or she understands the ramifications of signing such a deed.

First of all, this is a taxable gift. However, in most states there is no state gift tax to worry about, and if your total gifts during life will never exceed $1 million, you'll have no federal gift tax to worry about, either.

Second, and more importantly, you no longer own the house. That means that you're at the mercy of your child who now owns it. But you're not worried about your child kicking you out, you say? That's not necessarily the issue. What you should be concerned about is if your child gets sued because of a business deal gone bad or a car crash where the injuries exceed your child's auto insurance policy limits. You should also be concerned if your child gets divorced, with the divorce rate being as high as it is. You see, although even after you've signed the deed you may still think of your home as "your" house, it is now really an asset of your child's, and those creditors will have no problem foreclosing on "your" house and booting you out.

Third, there is the impact on Medicaid eligibility. If you or your spouse deed your home to one or more of your children, that transfer will cause a period of disqualification from Medicaid. This is called a "penalty period." The length of the penalty period depends on the value of your house. The formula the states use is this: amount of gift [divided by] penalty divisor = # of months penalty. The "penalty divisor" is a figure set by each state, roughly equivalent to the average cost of a nursing home in your state.

Example: You deed your house worth $150,000 when your state's "penalty divisor" is $5,000. $150,000/$5,000 = 30. Thus, if you applied for Medicaid the next day--or anytime prior to five years from now--you would be disqualified for the next 30 months. The only way around that is if you waited at least 5 years and then applied for Medicaid. At that point, the gift of the house would be ignored, since it is outside of the 5-year "lookback" period.

If in the above example your house were worth $350,000, the penalty period increases to 70 months! Of course, in that case, you would definitely want to wait to apply for Medicaid until after the expiration of the 5-year look back period. If for some reason you forgot and actually did apply before the 5 years were up, you would be faced with a 70-month penalty period. There is no upper limit to the length of the penalty.

There are exceptions to the above rule that allow a transfer of the house without it causing a penalty. These exceptions will be discussed in future blogs. Stay tuned!

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.

New! Comments

Leave a comment about this article in the box below and share it with your Facebook friends.

Have a Medicaid Question or Comment?

We'd love to hear your questions, comments or opinions. Submit them here and other visitors can read them and comment on them. An e-mail address is not required.

The purpose of this feature is to stimulate discussion and share experiences regarding topics of interest. However, please note these submissions are not reviewed for legal accuracy. They may not apply to your situation and should not be considered legal advice. For specific legal advice you must consult with your attorney.

What Other Visitors Have Said

Click below to see contributions from other visitors to this page...

How Best To Pay Down Our Liquid Assets?  
We have one child, an unmarried son. Our house and land are valued at less than $400,000. We want to deed the home over to him with Life Estate privileges. …

Estate being gifted to children 
My Mom of 86 years old is selling her home. Can we take out a loan and buy it from her, and then she in turn would gift us 13,000.00 per year from the …

What's Medicaid Impact If Mom Adds Name on House Deed?  Not rated yet
Question: Mom's on medicaid in a nursing home. Can she add a name on her deed to her house and on the title to her car? Or would that get her kicked …

Click here to write your own.

Medicaid Planning: Life Estate in House | Does the $13,000 Gift Tax Exemption apply to Medicaid? | Medicaid and Community Spouse Assets | Planning For Medicaid Coverage | Effect of Life Insurance Proceeds On Medicaid Eligibility | New Medicaid Annuity Rule Explained | How Can an Irrevocable Trust Be Used in Medicaid Planning? | Selling the House and Medicaid Qualification | How To Qualify For Medicaid If My House Is Worth More Than $500,000? | What is Elder Law? | Living Trust and Medicaid | What Is An Inheritor's Trust? | Should I Take Out a Loan Against My House to Pay For A Nursing Home? | Elder Care Lawyer Fees | Choosing A Nursing Home | Do I Need a Will? | Capacity To Sign a Will, Trust or Power of Attorney | Second Marriage Will Issues | Special Needs Trust Issues | What is a Common Law Marriage? | What is a Medicaid Annuity? | How does a Medicaid Annuity Work? | How To Protect My Home and Still Qualify for Medicaid | Medicaid and Spousal Will Election | Do It Yourself Medicaid Planning | Medicaid Rules and Reverse Mortgages | How Does Life Insurance Policy Ownership Affect Medicaid Eligibility? | Medicaid Estate Recovery Rules | Medicaid Estate Recovery Planning | Limitations on Medicaid Estate Recovery | Do Medicaid Plans Work? | Nursing Home Costs and Payment Options | Don't Be Too Cheap! | What Happens to My Home If I Go On Medicaid? | Can Spouse Receiving Medicaid Pay Income to Community Spouse? | Will Medicaid Exempt My Home If I Leave It? | Tips for Discussing Wills and Powers of Attorney With Your Parents | Elderly Marriage Issues | Durable Power of Attorney Medicaid Considerations |

From Can I Give My House to My Child and Qualify for Medicaid to Medicaid Questions | Estate Planning Blog | Basics of Estate Planning | Selecting a Financial Planner | Estate Planning and Taxes | Is This Good Time to Buy a House? | Incorporate My Business | Best Low Cost Investment | Fringe Benefit Plans | Estate Planning and Charitable Giving | Health Insurance Comparisons | Best Medicare Supplement Plan | Retirement and Estate Planning | What is a Power of Attorney? | Current Estate Planning News | Estate Planning Forum | Estate Planning Books | Choosing an Estate Planning Attorney | Find a Probate Attorney | Estate Planning Questions |

Return to Home Page

About Us | Contact Us | Site Search | Terms of Use / Privacy Policy

Subscribe to
Estate Planning Hub

Your First Name

Your E-mail Address

We keep this private.

Follow the Estate Planning Blog.

--by Beth Heikkinen
Marquette, Michigan
I just want to thank you for this site. It answered my questions. I think many people that do research on the net take it for granted and when they find what they are looking for they forget "someone put time, money, etc into providing me with this information."

Thank you!

Like This Site

Visit Our Social Media Pages

Become a Fan of Estate Planning Hub on Facebook Follow EstatePlanningHub on Twitter Follow EstatePlanningHub on Google+ Subscribe EstatePlanningHub Video on YouTube

Get a PDF version of this website and its sister site here.