Medicaid can tell whether you sell your house during your Medicaid coverage or five years before applying for the health care program.
When assessing your Medicaid application for eligibility, there is a 5-year lookback period, whereby they check your financial records to establish that you cannot pay for your health care costs.
Once you are on the Medicaid program, they monitor your account monthly to ensure that finances remain below the eligibility threshold. You are subject to Medicaid disqualification as soon as they realize you have exceeded the threshold.
In some circumstances, selling the house is the most reasonable option.
For instance, if you or your spouse lives in an assisted living facility, it can become difficult to keep up with maintenance costs such as property tax, home insurance, and utility bills. Or, you may no longer be able to make your mortgage payments risking foreclosure.
However, selling the house can compromise your Medicaid eligibility. Selling the house causes an influx of money in your bank account, which takes you out of the $2,000 monthly income threshold specified in most states.
With that said, there are strategies that you can employ to retain your eligibility despite selling the house. For instance, spend down the proceeds within the month.
If most of the sale proceeds go towards settling debt, the sale may not affect your eligibility. You could also spend the proceeds by buying another house, as long as it is an uncountable asset or within the countable assets exemption limit.
Other options for spending down the money include putting it away in a revocable living trust, car payments and repairs, credit card debt payment, medical bills, buying annuity, personal care agreements, medical aid asset protection trust, special needs trust, or even taking a vacation.=
If you cannot spend the money within a month, you will lose your Medicaid eligibility temporarily. You can reapply once your bank balance is within the threshold limit. Alternatively, consult an elder law attorney about selling your house without losing your Medicaid eligibility.
Medicaid does not take away proceeds from the sale of your house as long as the beneficiary or their spouse is alive.
However, some states have a Medicaid estate recovery program (MERP) that allows the federal government to attempt to recoup the costs of catering to a beneficiary’s health or assisted living once they die. In this scenario, Medicaid files for a claim on your estate once you die.
However, there are exceptions. For instance, they cannot claim the house if your spouse, children under 21 years, or persons with disability or special needs live in the house.
Even when they have a lien, they only get a portion from the proceeds of the sale of the house equal to your Medicaid expenditure. If the house has lower equity than your long-term care expenditure because of no repairs, then Medicaid gets a portion for reimbursement.
Nevertheless, if you had done estate planning before your Medicaid application, then the MERP does not have a lien on your estate. For instance, if you had put the house in a revocable trust or applied for an angel title deed.
No matter how long you stay in the nursing home care, Medicaid cannot sell your house as long as it remains as you or your spouse’s primary residence and you have intent to return.
You do not require approval from Medicaid services to sell your house. However, it is a good idea to inform them about the sale of the house towards closing.
It will give them a heads-up about the sudden income influx in your account. You can then follow up with a meeting with your elder law attorney to explain how the money will be spent to retain your eligibility.
If you gift your house within five years of applying for the medical program, it will compromise your eligibility to the health care program as the 5-year lookback period applies. Similarly, you lose your eligibility if you gift the house while on Medicaid coverage.
Unlike the IRS, which has a gift tax exemption of $15,000 for each beneficiary, even a small transfer will affect your Medicaid eligibility. The only exemptions for a transfer are if you transfer the house to a spouse, disabled child, a beneficiary aged 21 years or below, a sibling, or a caretaker.
Medicaid has stringent eligibility criteria to ensure that only deserving people with low income enjoy its benefit. Therefore, they monitor your finances closely when applying for Medicaid or once you qualify.
As such, if you sell your house, it will not go unnoticed due to the sudden increase in the amount of money in your account. Talk to your elder law attorney to get legal advice about asset protection options that do not compromise your Medicaid eligibility.
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If you sell your house, you may lose your Medicaid benefits, and this is why. You may lose your benefits because if you end up with too much cash in your bank account, you might exceed your state’s threshold.
Every state sets its own threshold for Medicaid. However, most states set the threshold at $2000.00
Therefore when you sell your house, if you end up with more than $2000, you may not qualify for Medicaid anymore.
Your house is not considered an asset for Medicaid in Colorado as long as it is not worth more than $603,000. Other assets that are exempt include:
Cash is considered a countable asset. Because of this if you sell your house and end up with more than $2000 in your bank account you can lose your Medicaid insurance if you sell your house.
The way to keep your Medicaid after selling your house is to spend the cash from the sale. You need to get your cash assets back down below $2000.00. Check this comprehensive guide about Medicaid and selling your house that includes expert advice on how to spend down the proceeds so that you can still get Medicaid.
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