How Can the Proceeds of House Sale Be Protected for Nursing Home Resident?

 In Long-Term Care Planning


My mother has Alzheimer’s disease and is in a nursing home already being covered by Medicaid. After we hand over all my mother’s pension money each month ($4,000), Medicaid covers the rest. I am my mother’s legal POA. I have just sold her house and want to put aside the allowed amount ($12,500) for funeral expenses. We are going to settlement in ten days. How do I do this at the time of settlement? Is there any way to put the funds in a revocable trust so the remainder of any monies does not go to Medicaid? Could I set up a payable on death account with my bank? Basically what I want to know is there any way to protect some of the proceeds from the sale of her home from Medicaid, since they are already taking every dime she has left!nursing-home-real-estate-revocable-trust-Wellesley-MA


When the house sale occurs, Medicaid may or may not have a claim to be reimbursed from the sale proceeds for whatever it has already paid for your mother’s care. Some states are more aggressive and organized than others in terms of putting liens on the homes of nursing home residents. Assuming that your state Medicaid agency has not placed such a lien or that there’s still money left after its been paid, your mother will become ineligible for benefits because she’ll have more than the $2,155 (in most states) asset limit. You can certainly take some of this money and prepay her funeral as you suggest. Your mother will then become eligible for Medicaid again once the proceeds have been spent down to $2,155.

It can be difficult to save any of the house proceeds in the situation you describe, other than the funeral prepayment. As you suggest, if you put the funds in a revocable trust or a payable on death account and there’s still money left in the account when your mother passes away, then the funds may go to the named beneficiary or beneficiaries rather than being subject to the state’s claims for reimbursement. That depends on whether or not your state has expanded estate recovery. Some states only seek reimbursement from the probate estates of deceased beneficiaries and others from property that passes outside of probate as well.

In some states, you can also transfer the funds to a pooled disability trust, which could make them last a bit longer. You can read more about this option here: (d)(4)(C) or Pooled Disability Trusts Shelter Assets for the Disabled. A local elder law attorney could advise you on whether this option is available in your state. If anyone in your family has a disability, your mother could also transfer assets into trust exclusively for that person. You can read more about this opportunity at Transfers of Assets that Medicaid Does Not Penalize. Otherwise, you’re probably out of luck.

I would like to clarify one misconception. Medicaid is not taking your mother’s money. Rather, it is paying for her care. Your mother has to contribute what she can, and then Medicaid picks up the rest of her cost. It’s far from an ideal system, but we should not lose sight of the benefit it provides.

Related Articles:

Crisis Medicaid Planning Strategies

The Complicated Medicaid Transfer Rules

(d)(4)(C) or Pooled Disability Trusts Shelter Assets for the Disabled

Showing 6 comments
  • Jeanie Forrest

    My mother is sailing her house and going into a nursing home. Will she be able to pay me, her daughter ,
    all the money she has put into taking care of the mothers house ? Is the mother pays it back and has only enough money for a nursing home for 6 months can mother receive Medicaid?

    • Harry Margolis

      Dear Ms. Forrest,
      The problem is proving to the Medicaid program that your mother owes you the money. There’s no problem with paying back a debt, but a gift would cause a period of ineligibility for Medicaid. If you had a promissory note from your mother to you, that would prove the debt, but most families aren’t so formal. Any other proof that you loaned the money to your mother might do the trick. There may be other ways to save some or all of the house proceeds, so I strongly recommend that you consult with a local elder law attorney. If you don’t know one, you might be able to find one on the site Good luck.

  • April

    My Mom has recently been moved to a nursing home while I, an adult child, continue to live at our house. She is still paying the mortgage on the house. If I were to buy the house from her, would she be able to use the “proceeds” to pay off her mortgage and credit card debts? Or, would Medicaid come after that money?

    • Harry Margolis

      Your mother could use the proceeds of the house sale to pay off her mortgage and debt. Medicaid may or may not have placed a lien on the house for payments to date, so you may or may not have to pay that off as well. Any remaining funds would go to your mother and make her ineligible for benefits until they are spent down. Be aware that you have to pay fair market value for the house. If you pay less, Medicaid will likely deem the difference to be a gift to you and make your mother ineligible for benefits for a period of time as a result. Details can be important in this type of situation. I would strongly recommend that you work with a local elder law attorney.


    Hello, Harry…

    In 2013, my niece, whom my sister and I appointed as trustee of our family estate in Ukiah, Calif., sold the family house without ever notifying either one of us. But since this time, we also have received no documentation on any aspect of the trustee’s management of the estate. My niece and her husband lived in the house between 2008–the year my mother died (her husband died years earlier), and paid bills to keep the house going. All seemed to be going smoothly. But now that the house is sold, my sister and I don’t have any record from her daughter–again, the trustee–of where the money from the house sale went. We’ve been given one misleading piece of information after another. We suspect fraud.
    After all of these years, how would my sister and I go about finding out where the house sale money went and how we can not just get it back, or find out if it was spent, but also remove my niece as trustee???? If we can somehow find out from, I guess, the title company handling the house sale how much money was issued to my niece and where it was deposited, this might be helpful. My niece said the money is in a U.S. Bank branch in Sacramento, but I asked U.S. Bank about this and they have no record of such an account. And, my niece claims the money can’t be touched because her husband has a lien on it. ??????? Is that even possible, or legal?
    -Bob Galvin

    • Harry Margolis

      Without seeing the trust I can’t give you any definite advice, but it does seem like your niece is not meeting her fiduciary duty as trustee to the family. You can go to court to remove her as trustee, demand an account and, possibly, seek damages to the extent she or her husband have taken funds from the trust to which they are not entitled. The biggest problem in this kind of situation is that the money may well be gone, in which case even if you win, you may get little or nothing. That’s also an issue in terms of getting an attorney. You can definitely hire a lawyer, but that would be money out of your pocket. A lawyer might take this type of case on a contingency basis, but they also would want to be certain that there are funds to be paid from. One approach would be a hybrid, where you would pay the lawyer for a certain amount of time to determine whether there’s a possible recovery, and then the actual case would be brought on a contingency basis.

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