It may be possible for a person to give their home to their children to avoid care home fees, though this depends on many factors, including their health needs, family structure and financial situation. Before giving away assets, consult an estate planning lawyer for specific advice.

With average nursing home care costs reaching $7,908 per month in 2021, it’s understandable to look for sources of financial assistance. Medicaid, a government health insurance program for low-income Americans, is the nation’s primary payer of nursing home care. However, seniors who are considering giving away assets to become eligible for Medicaid should tread carefully.

Medicaid’s 5-Year Look-Back Period

In general, transferring assets for less than their fair market value is prohibited in the 5 years before a person applies for Medicaid long-term care services and supports. That’s because Medicaid is designed to help people with lower incomes, and the government expects people with greater resources to contribute toward their own care home costs.

People who give away homes or other assets during the 5-year look-back period may face a penalty period when they apply for Medicaid-funded nursing home care. During the penalty period, Medicaid won’t cover a person’s nursing home costs. States calculate the length of the penalty period based on the value of the assets and the average cost of nursing home care. 

Exceptions to the 5-Year Look-Back Rule

A person who recently gave their home to their children may be eligible for Medicaid-covered nursing home care in limited situations. Per federal law, a person can transfer their home to their child without penalty if the child is under age 21, blind or disabled or has acted as their parent’s live-in caregiver for at least 2 years. 

Gifts made before the 5-year look-back period aren’t counted. With the help of a Medicaid planner or estate planning attorney, people who arrange for their long-term care needs in advance may give away their home or other assets without penalty. 

Medicaid Eligibility for Homeowners

It’s important to note that seniors who own homes aren’t necessarily ineligible for Medicaid-funded long-term care services, including nursing home care. A senior’s primary residence is generally not factored into Medicaid eligibility, so long as their home equity falls below the limit in their state. The federal home equity limit is $688,000 in 2023, though some states set higher limits.