Can You Protect Your Home During a Medicaid Crisis? Yes, Here’s How

The family home is so much more than just a financial asset; it’s a repository of memories, a symbol of stability, and a cherished legacy. When the reality of long-term care sets in, many families understandably fear that their home will be sold to cover care costs, or worse, seized by the state after their loved one passes away. Thankfully, with the right planning, there are indeed ways to protect your home—even in the midst of a Medicaid crisis.

Why the Home is at Risk

Here’s the critical detail: While a person’s primary residence is often considered a “non-countable” asset during their lifetime (under specific conditions), it becomes vulnerable after death due to Medicaid Estate Recovery. This federal mandate requires states to attempt to recoup the costs of long-term care paid on behalf of Medicaid recipients, often by targeting the individual’s estate—and the home is frequently the largest asset within it.

What Can Be Done?

1. Life Estate Deed:

A life estate deed allows an individual to retain the right to live in their home for the rest of their life, while legally transferring ownership to another person (typically a child or spouse).15 Upon death, the property automatically passes to the new owner, bypassing probate and, in most states, avoiding estate recovery.

2. Transfer to a Caregiver Child:

If an adult child has lived in the home for at least two years before the parent entered long-term care, and provided caregiving that significantly delayed the need for nursing home placement, the home can often be transferred to them without incurring a penalty. This is known as the “caregiver child exception.”

3. Transfer to a Sibling with Equity:

If a sibling also owns a portion of the home and has resided there for at least one year prior to the owner’s institutionalization, the home can frequently be transferred to them.

4. Irrevocable Medicaid Trust:

Placing the home into a properly structured irrevocable trust effectively removes it from the Medicaid applicant’s name. This offers robust protection from estate recovery. However, for full effectiveness, this strategy generally needs to be implemented before the five-year “look-back” period.

Timing Truly Matters

It’s important to understand that not all strategies are viable once a Medicaid application has already been submitted or if care has been ongoing for an extended period. However, even with late-stage planning, it’s often possible to preserve the home, or at least a significant portion of its value, with swift and strategic legal action.

Key Takeaway: The family home doesn’t have to be sacrificed to pay for care. Whether through carefully structured trusts, specific deeds, or legal exemptions, there are legitimate ways to protect your family’s most meaningful asset—even in a crisis.

Your home doesn’t have to be lost to the costs of long-term care. Speak with someone who truly understands how to leverage these protections effectively. Schedule your Medicaid home protection review today.