Can Wife of Medicaid-Covered Nursing Home Resident Sell Rental Property and Give Proceeds to Children?
My husband has been in a nursing home for two years already. I need to sell 5 rental homes that I cannot manage and don’t want any more. Can I sell them if they are on my name? Can I give the proceeds to our children? What is the best way to give proceeds to 10 grandchildren and 3 married children? Can I not sell ONE of the homes but instead transfer it to one child that wants it?
Or will Medicaid keep all of these homes we worked so very hard for?
First of all, with your level of assets and given the different policies of Medicaid agencies throughout the country, you really need local counsel. If you do not have an elder law attorney already, you should be able to find one at www.ElderLawAnswers.com.
But let’s discuss the general rules. There are three that apply in your situation in terms of getting and maintaining Medicaid coverage of your husband’s nursing home care. (Though you don’t say it explicitly, I take it that your husband’s care is currently covered by Medicaid.) They are:
- To gain Medicaid coverage, you and your husband are limited to approximately $150,000 (in 2023) in “countable assets.” I often compare this to dancing the limbo. You have to get under this threshold for your husband to be covered, but once he has been approved for Medicaid benefits, you can accumulate more.
- Any transfer of assets can cause your husband to be ineligible for benefits for up to five years following the transfer.
- You must report any change in your circumstances to the Medicaid agency.
Let’s see how these rules apply in your situation. First, the reader may wonder how you got under the $150,000 threshold if you own five rental properties. I presume that the answer is that the rental properties are not “countable” because they fall under an exception for business property “essential for self support.”
So, what happens if you sell them? Then you’ll have cash which is no longer business property essential for your support. However, I would argue that the proceeds are “after-acquired” property—which isn’t different from what would happen if you inherited some money or won the lottery. You have already gotten under the $150,000 limbo stick for your husband to become eligible for Medicaid. The agency should no longer be concerned about your level of assets after you’ve done so and such a sale should not affect your husband’s continued eligibility. Nevertheless, you should report the sales since they constitute a significant change in your circumstances.
Turning to the question of whether you can transfer the proceeds or one of the houses to your children or grandchildren, I think that is more problematic. Unlike the rules regarding countable assets for married nursing home residents, the Medicaid rules regarding transfers don’t clearly exempt post-eligibility gifts — gifts made after the nursing home resident has been deemed eligible for coverage. Transferring the houses to your children directly can also result in higher capital gains taxes for your children when and if they sold the properties. Rather than making any gifts to your children and grandchildren today, I’d recommend making sure that your estate plan is updated, so that if you happen to die before your husband, your assets then pass to your descendants, rather than to your husband. This may be done through trusts, which might also protect the property should you ever need Medicaid coverage yourself in the future.
To repeat, these are all general rules which may be applied differently in your state. Please consult with a local elder law attorney.