Can I Sell My House While on Medical?

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You can sell your house while on medical. However there are definitely some things you need to think about. We will get into everything you need to know about selling your house while on medical right here. 

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Most people on Medicaid find themselves living away from home in an assisted living facility but still have to pay for utilities, insurance, taxes, and in some cases, a mortgage. The recurring expenses can become overwhelming.

Therefore, it would be reasonable to sell the house. However, you have to consider if selling the house will cause you to lose your eligibility for Medicaid coverage.

When determining whether selling the house will compromise your medical eligibility, the main factor to consider is whether the house is considered a countable or non-countable asset. Your eligibility also depends on what you do with the house’s sale proceeds.

This article will discuss how to sell your house without disqualifying you from Medicaid.

Medicaid/Medicare: Your Guide to Medical Benefits and Selling a House

Table of Contents

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Understand the Medicaid Eligibility Criteria

The goal of Medicaid is to enable elderly adults, low-income individuals, and people with disabilities who are in financial need to access long-term medical care. Federal governments in each state have stringent eligibility criteria to ensure only people in need qualify for the program.

One of the key eligibility criteria is reaching the liquid asset threshold limit. In most states, including Colorado, the threshold limit is 2000 dollars per month. However, in jurisdictions such as Florida, the threshold is high as $10,000, while in Connecticut, it is as low as $1600.

Selling a house may affect your threshold limit as it creates an influx of money in your account.

Another eligibility criterion is the total equity on countable assets. If your home is considered a countable asset, it should not exceed an equity of $595,000 in most states.

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Notably, the state of California does not provide a maximum equity limit. The equity is established by deducting any amount owed on the house, e.g., a mortgage, from the fair market value.

Other assets that are exempt include:

  • Personal belongings
  • One vehicle
  • Life insurance whose value is below $1500
  • Commercial or residential property whose proceeds go towards self-support and are below the $2000 threshold limit
  • Assets in specific types of trust
  • Prepaid funeral plots

If the house is considered a countable asset, selling it does not affect your Medicaid eligibility.

Below are the conditions under which your house would be exempt from being a non-countable asset:

  • The home must be in the state you are applying for medical aid in
  • If your spouse lives in the house
  • If a dependent aged 21 or below lives in the house
  • If a person with a disability lives in the house
  • If you intend to return to the house after living in the nursing home.
  • If the equity does not exceed the provided limit.
  • If a sibling with equity in the house has lived there for at least a year.

In some states, you must write a letter or an affidavit as part of your Medicaid application to express your intent to return. In some states, a physical examination is required to assess if there is a chance you will be able to come back home. Ultimately, it does not matter if you eventually return to your home from the assisted living facility.

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Ensure to Sell the House at Market Value

The market value is established through an appraisal process by assessing the house and comparing it against similar properties in the area. To retain your eligibility for Medicaid when selling a house that is exempt, the sale price must be within the fair market value. Otherwise, the sale is considered gifting, and a penalty may apply.

This requirement seeks to discourage homeowners from gifting their homes by selling them to a family member or friend at a much lower price than the fair market value.

Some states have a look-back period of 5 years, within which you should not have sold a house below the fair market value to qualify for Medicaid.

With that said, gifting is viable in select scenarios. For instance, if the Medicaid beneficiary is incapacitated and a power of attorney has been established and given gifting rights.

Ensure the State Does Not Have a Lien on the Property

In some states, the government can impose a Tax Equity and Fiscal Responsibility (TEFRA) lien on the home of a medical beneficiary. Whereby the state claims part of equity from the sale of the house to settle costs of your long-term care. TEFRA lien only applies if you have moved away from the home to a long-term care facility.

If your house is considered a countable asset, Medicare has a lien on it and will use it to repay the spend portion on your cover if you leave the nursing home or are deceased.

Spend Down the Proceeds

Once you sell the house, you want to spend the assets as quickly as possible to retain your threshold limit. The most eligible expenses for spending money from the sale include mortgage balance, car payments, vehicle repairs, medical devices, credit card payments, and medical bills.

You can also buy a new house as long as it is within exemption requirements. Other ways to spend down include buying an irrevocable funeral trust, personal care agreements, taking a vacation, and buying an annuity.

If you are not able to spend down the amount within a month, you will be temporarily disqualified from Medicaid coverage until you meet the threshold limit. There is no penalty for the disqualification, and you can reapply later. However, you still have to prove that you have financial constraints despite the momentary influx in liquid assets. If you are unsure what to do, consult with a Medicaid attorney.

To Sell or Not Sell?

When deciding whether to sell or not sell your house, you need to consider several factors. First, whether the house is a countable asset or not. Suppose there is someone else living in the house. How much it costs to maintain the house and whether you can afford it or your loved ones are willing to foot the bills.

If you find it difficult to pay the maintenance expenses and no one else lives in the house, then selling is a viable option, especially if the house is exempt. On the other hand, if someone else lives in the house and there is a way to manage the maintenance costs, it is best to keep it.

Keep the house if you anticipate returning home from the assisted living facility. However, if the maintenance costs are too high, you can sell and buy a smaller one whose costs are more manageable.

If you choose to sell, follow the due process from staging, listing, to close. You can sell the house yourself or hire a real estate agent to assist you. A cash sale to a reputable cash sale company such as Webuyhousesindenver.org is the easiest way to sell the house yourself.

Does Medicaid Take Away the Home if the Recipient Dies?

Most states have a Medicaid Estate Recovery Program (MERP) whose role is to attempt to reimburse the long-term care costs incurred by the recipient. The program has a lien in the recipient’s estate; in most cases, the remaining asset is the patient’s home. Therefore, the program files for estate recovery once the recipient dies.

The exact execution of MERP varies from one state to another. In most states, the recovery program is not viable if the recipient’s spouse is alive. In other states, such as Florida, MERP is obligated to recover the house once the surviving spouse dies. The house cannot be recovered if a child under 21 or a disabled sibling or child lives in it.

Proper estate planning can help ensure that your house goes to your preferred beneficiary once you are deceased. It prevents the house from going through probate, which would give MERP lien. Also, revocable trusts, caregiver exemptions, sibling exemptions, and angel title deeds help protect the home.

Can You Sell a House and Still Get Medicaid?

Yes, you can as long as you do not violate the look-back period rule of the Medicaid program. Since there are asset limits to be eligible for Medicaid, the look-back rule seeks to ensure that applicants do not give away their properties to be eligible.

Therefore, for you to qualify, you must not have sold your house for less than the market value. You should also have spent down the proceeds to meet the income threshold limit. There will is no penalty if you had gifted the house before the look-back period.

Conclusion

It is possible to sell a house while on Medicaid without compromising your eligibility or qualification. Most homeowners meet the requirements for exemption so they can sell their house.

However, the house must be sold at fair market value, and you must spend down the money through allowable items to go back to the required threshold.

If you want to sell your house but are unsure how it will affect your eligibility for Medicaid coverage, consult with a Medicaid planning professional. They will advise you on whether to sell or not and how to sell and relocate your income or assets. An elder law attorney may also come in handy.

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