What Options for Medicaid Patient's Home That Won't Sell?

Oct 22, 2010
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Half a Loaf Gifting Strategy
by: K. Gabriel Heiser

Upon your aunt's death, the state is required to file a claim for all the Medicaid payments it made on her behalf. In other words, it wants to be paid back!

Since the only asset of your aunt's is her house, the state will force a sale of her house in order to be repaid. If the bill from the state is more than the value of the house, it is out of luck to that extent. If the house is worth more than your aunt's bill to the state, the balance of the sale proceeds will pass to her beneficiaries under her will, if any, otherwise as provided by the state intestate statute.

To prevent the state from making that claim against your aunt's estate, you can try to sell the house at a discount (perhaps to one or more of her relatives). Depending on the amount owed the state, it still may be worth doing, because then it may be possible to do other planning.

One technique would be what is called "half-a-loaf" gifting, where she makes a gift of approximately half the value of the house proceeds to her favored relatives and purchases an exempt Medicaid annuity with the other half.

She will need to re-apply for Medicaid to establish the penalty period that results from the gift, and then use the monthly annuity payments to cover her private pay nursing home costs during the penalty period. At the end of that period, she will re-apply for Medicaid, and since the penalty period has now expired, she will once again be covered by Medicaid. Result? Approximately half the value of the house (i.e., the amount of the gift) has been protected.

There may be other planning techniques available, too, depending on her family situation and your state laws. I cover a number of them in my book.

Good luck!

What Options for Medicaid Patient's Home That Won't Sell?

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What Options for Medicaid Patient's Home That Won't Sell?