What Happens to My Parents’ House if They Go Into a Care Home?

If your parents go into a care home, their house is usually safe from being taken while they’re alive, but it may need to be sold after their deaths. Your parents’ primary residence is considered an exempt asset, so it’s not counted if they apply for Medicaid to pay for the care home. However, the situation may get complicated if they have too much equity in their home and apply for Medicaid coverage for long-term care, including nursing home care. Medicaid could put a lien on the house to recoup what it paid for your parents’ care.

It becomes even more complicated if you move to your parents’ house to care for them before they enter a nursing home. If you gave up your own home to live with them for an extended period, your concern over what happens to the only home you have right now could increase. They could lose the house as part of the application process for Medicaid.

To help ensure they don’t lose their house, your parents could transfer it to you. Unfortunately, transferring a large asset could cause them to be ineligible for Medicaid and incur a penalty period. Before your parents transfer the house to you, consult an attorney to confirm how they can avoid being penalized by Medicaid. Your parents should be able to freely transfer their home without a penalty to the following people:

• A spouse, if only one is going into the care home
• An adult child who lived in the home and provided them with care for at least 2 years before they moved to a care home
• A child under the age of 21 who’s disabled or blind
• A sibling who lived in the home for 1 year before they moved to a care home, establishing an equity interest in the house
• A disabled person under age 65 via a trust

An adult child who cared for their parents before they moved into a care home may qualify for an undue hardship waiver. A primary example of this situation is when an adult child without another permanent residence lives with and cares for their parents before they move into a nursing home. The child may prevent a claim on the house after the parents pass away through an undue hardship waiver. Talk with an attorney to see if the waiver might apply to your situation.

Medicaid has stringent rules on giving assets away before applying for benefits to move to a nursing home. The government agency has a look-back period of 5 years, in which it checks to see if you’ve given away any assets. If your parents were forward-thinking, they may have planned ahead and deeded the home to you 5 years ago, making it a nonissue. Otherwise, look for an appropriate exception to avoid your parents being disqualified for assistance.

If you moved into the house to care for your parents and can prove you lived there for at least 2 years, you should be covered. You must have acted as a caregiver to your parents, received mail at the residence and have their address on your driver’s license. The Department of Health and Human Services, which administers Medicaid, may require medical proof that your parents would have needed a nursing home level of care without your caregiving and your care postponed their move to a nursing home. This loophole only applies to a biological child, not a stepchild or grandchild.