Medicaid Planning to Protect Your Home When Entering a Nursing Home

Medicaid covers long-term nursing home care but requires asset spend-down. Strategic planning at least 5 years before application (look-back period) can preserve the home.

Key Strategies

1. Spousal Transfer (Community Spouse Resource Allowance – CSRA)

• Home excluded if spouse lives there (no equity limit in most states).
• Transfer to spouse penalty-free anytime (no look-back for spouse).
• Spouse can later sell/transfer without affecting institutionalized spouse's eligibility.

2. Irrevocable Medicaid Asset Protection Trust (MAPT)

• Grantor transfers home to trust; retains right to live there (life estate).
• Trustee (child/trusted person) manages; principal inaccessible to grantor.
• Must be funded >5 years before Medicaid application.
• Step-up basis at death for heirs (capital gains benefit).

3. Medicaid-Compliant Annuity (MCA)

• Convert countable assets into income stream for community spouse.
• Irrevocable, non-assignable, actuarially sound, state as remainder beneficiary.
• Used in "half-a-loaf" strategies with gifting.

4. Long-Term Care Insurance (LTCI)

• Pays for care; preserves assets for heirs.
• Buy in 50s/early 60s; hybrid life/LTC policies available.

5. Other Options

• Caregiver Child Exemption: Adult child living in home 2+ years providing care that delayed institutionalization → transfer home penalty-free.
• Sibling Equity Exemption: Sibling with equity interest living in home 1+ year.
• Reverse Mortgage / HELOC: Access equity for care; loan repaid at sale/death. Complex; counseling required.
• Downsize: Sell, buy smaller home; excess proceeds spent on care.

Critical Warnings

• 5-Year Look-Back: Any transfer < FMV within 60 months → penalty period (value ÷ state divisor = months ineligible).
• Estate Recovery: State reclaims from probate estate after death (including life estate remainder). MAPT avoids this.
• State Variations: Divisor, CSRA, exemptions differ. Consult a Certified Elder Law Attorney (CELA).