May Nursing Home Resident Give House to Spouse Without Medicaid Transfer Penalty?

 In Long-Term Care Planning
Medicaid transfer penalty spousal refusal

Photo by Sven Mieke on Unsplash


Can you tell me if the exception for Medicaid applies between spouses to transfer the home, when one spouse does not live in the home but is not legally separated and is the healthy spouse?


Yes, in most instances. Normally, under the Medicaid program there’s a penalty for transferring assets of up to five years of ineligibility for benefits. Medicaid is our nation’s safety net health care insurance. To be eligible, you have to prove that your poor under its complicated guidelines. In essence, Congress has said that if you become poor by giving away your assets, they don’t want to cover you.

However, there are some exceptions to this penalty, including transfer to spouses. Since in most instances, spouses are considered together in determining eligibility for benefits it doesn’t matter whether assets are in one spouse’s name or the other. So there’s no Medicaid penalty for transferring assets between them. This exception applies to any asset, not just to transfers of the home.

That said, when a spouses are asking Medicaid to treat them as separate households or filing units, it may apply a penalty despite the general exception. In the area of Medicaid coverage of nursing home care, there’s a planning strategy known as “just say no” or “spousal refusal.” If one spouse is in a nursing home, and the other spouse refuses to cooperate with the nursing home spouse’s application for benefits, then Medicaid must evaluate the nursing home spouse’s application for coverage without regard to the healthy (or “community”) spouse’s assets. In that case, the couple is no longer applying for benefits as a single filing unit and it would seem inconsistent to permit a spousal transfer without penalty.

So, to answer your question, if the couple is applying for coverage under the normal rules, there’s not Medicaid penalty for transferring the house or any other asset. But if they are using the spousal refusal strategy, a penalty is likely to be imposed.

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