Question:

Though I have read some of your related articles, I still am not quite clear: in the case of an institutionalized spouse with a healthy community spouse who lives in their home, will a lien be placed on the home to cover nursing home costs? Your articles seem to indicate the answer is no. Yet, this doesn’t seem fair when compared to a surviving spouse whose home will definitely be a countable asset.

Response:

That’s right; there’s no lien on the house as long as the community spouse continues to live there.

To explain, in most states, nursing home residents can keep their homes and still get Medicaid coverage of their care costs (assuming they have spent down their other assets) as long as the value of the home is below set levels—currently (in 2023) either $688,000 or $1,033,000, depending on state option. (You can check the rules in your state here.) However, the state will place a lien on the property to recover its cost of care upon your death. There are, however, a few exceptions when the Medicaid agency may not place a lien, and one of those exceptions is when a healthy spouse, known in Medicaid parlance as the “community” spouse, continues to live in the house.

But this does not mean that couples in this situation should not do some planning. There’s always the risk that the community spouse dies before the institutionalized spouse. So we always recommend that house be transferred into the community spouse’s name—there’s no penalty for transfers between spouses—and that the community spouse execute a new will, either disinheriting the institutionalized spouse or creating a testamentary trust for her benefit.

You’re also right that if the community spouse later needs Medicaid coverage, his house will be subject to lien. But, of course, in that situation, there will no longer be another spouse who needs to continue to be able to live in the house.

 

Related Articles:

Can I Avoid the Medicaid Lien on My Mother’s House?

Transferring House to Child with a Disability

Should My Parents Give Me Their Home?

How Can I Protect My Property for My Sons?

Does Caretaker Child Exception Apply to Estate Recovery?