Can I Give My House To My Children To Qualify For Medicaid?

Can I Give My House To My Children To Qualify For Medicaid?

Many families are told “If you think your mother will go on Alabama Medicaid, she needs to give the house to you so Medicaid can’t get her house.”

I’m not terribly surprised that non lawyers give out this bad advice.

However, I am shocked at the number of lawyers that give (or are paid for!) this advice.

It can have devastating consequences to you unless this is done the right way at the right time.

Alabama Medicaid has what is known as a 5 year (60 month) look back period.

This means that when you apply, and are otherwise qualified for Medicaid, then Medicaid looks back at all of your transactions over the last 60 months.

Medicaid is looking for gifts or “uncompensated” transfers.

If it sees any gifts — for example that the house was given to your child for 1 dollar — then Medicaid flags this as an uncompensated transfer.

It then determines the fair market value of the gift.

Let’s say this is $150,000.

It divides this number by the number Medicaid says is the average price of a nursing home in Alabama every month.

They say $5,800 (updated for 2017).

Now this amount of $5,800  is actually lower than the true cost of nursing home care in Alabama.

However, this is what the law uses for dividing into the amount of the gift.

So $150,000 divided by $5800 is about a 26 months.

This means that once your mother, for example, qualifies for Medicaid, then the family must pay the cost of the nursing home for 26 months.  This is normally over $6,000 a month.

So this “great idea” of transferring the house may cost the family more than the value of the house.

Now if you know or suspect that your mother won’t need Medicaid in the next 60 months, this can be an effective strategy.  If you have an elder care lawyer look at the whole situation and advise you on the advantages and disadvantages of doing this.

For example, one disadvantage is if you, as the child, have creditors or get divorced, etc. the home may be lost.

A solution to this is to put the home in an irrevocable trust of the right type so that it is protected.

There can be negative tax consequences to giving away a home that has appreciated greatly in value.  This is very common when older family members give away their homes.

Again the right type of irrevocable trust can help with this.

Also, if you are married, then as long as your spouse is alive, the home is normally safe from Medicaid.

The point is that there are few “simple” things in elder law.

It’s not the time to take a neighbor’s or what your insurance salesperson heard when you’re dealing with Alabama Medicaid.

You need to make sure you are getting solid advice and understand the consequences of what you are doing.

Contact Us.

If you would like to chat with us, give us a call at 205-879-2447.

You can also fill out a contact form and we will get in touch with you as soon as possible.

We can set up a simple meeting to find out more about your situation.

I look forward to chatting with you!

Have a great day.

-John G. Watts

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