If mom's house is deed to me, can I sell it before she applies for Medicaid?

A fellow caregiver asked...

My mother is in the nursing home right now for rehab and skilled nursing care. She is in the beginning stages of Alzheimer's. We live in Oklahoma. She still owes on her home but she has signed the deed over to me. My question is can Medicaid take the house away from me if she files for Medicaid and can I sell the house before she signs up for Medicaid?

Expert Answer

There are two different parts of Medicaid. One is Medicaid coverage of medical care. For this type of Medicaid coverage, selling the house to you will have no effect on your mother's Medicaid application, and Medicaid will have no claim on the house. Be aware, though, that if your mother applies for Medicaid, they will not necessarily accept her if she has enough income or assets to to continue making the house payments.

But there is also Medicaid coverage for long-term nursing home care, which it seems that you're asking about because of your mother's early-stage Alzheimer's. For this kind of Medicaid coverage, the rules are more complicated and tougher. First, the good news: If your mother deeded her house to you before she applies for Medicaid nursing home coverage, the house is yours. You can sell it or not. Medicaid will have no right to the house or any claim against it. However, Medicaid will not allow your mother to keep making payments on the house -- if and when she's eligible for Medicaid nursing home coverage, her money has to go instead toward her nursing home costs.

The bad news is that your mother deeding you the house may make her ineligible for Medicaid nursing home coverage for some months after she applies. That's because Medicaid considers as still belonging to the applicant any gift the applicant has made within 5 years of applying for nursing home coverage. The value of the gift -- in this case, the equity in the house -- is considered part of the applicant's (your mother's) assets for purposes of Medicaid nursing home eligibility. If your mother's equity in the house plus her other assets exceeds the state's Medicaid eligibility limit (which is usually only about $2,000), she will not be eligible for Medicaid nursing home coverage during a penalty period. The length of that penalty period is the amount of the gift (the equity value of the house at the time she deeded it to you) divided by the average monthly nursing home costs in the state where she lives. So, if her equity in the house was $30,000 and the average monthly nursing home costs in her state is $3,000, she would be ineligible for Medicaid nursing home coverage for a period of 10 months ($30,000 divided by $3,000) after applying.