Will I lose Medicaid if I sell my house in Illinois?


How Will Medicaid Know if I Sell My House?

If you’re on Medicaid and planning to sell your home, you’re probably wondering: Will I lose Medicaid if I sell my house? How will Medicaid know if I sell my house?

This guide explains how selling your home could impact your Medicaid eligibility and provides strategies for maintaining your benefits.

Will I Lose Medicaid if I Sell My House?

The short answer is: not necessarily, but it’s possible. Medicaid evaluates your eligibility based on income and assets, and selling a home could impact these figures. However, if you use the proceeds from the sale in a Medicaid-exempt manner, such as buying another primary residence, you might not lose your coverage.

The key is understanding how the sale affects your financial situation relative to Medicaid’s eligibility thresholds. Medicaid eligibility is means-tested based on income and asset limits. In most states, the asset threshold is $2,000, meaning the proceeds from selling your home will likely exceed this limit.

One common exception that allows you to retain Medicaid eligibility after a home sale is using the proceeds to purchase a new primary home. Generally, a Medicaid recipient’s principal residence is considered a non-countable (exempt) asset.

You can check your state’s eligibility requirements through Medicaid’s interactive map.

How Will Medicaid Know if I Sell My House?

When you applied for Medicaid, you had to disclose all assets, including real estate. Medicaid monitors changes in your assets by coordinating with federal and state agencies. Here’s how they’ll find out:

  1. Public Records: Property sales are public records that Medicaid can access to verify changes in your assets.
  2. Financial Disclosures: When you renew your Medicaid coverage (typically every 12 months), you must disclose your financial situation, including any real estate transactions.
  3. Coordination with Other Agencies: Medicaid collaborates with other state and federal agencies to track significant asset changes.

As you plan to sell or transfer ownership of your home, remember that Medicaid’s goal is to assist those with genuine need. Honesty and transparency are crucial for maintaining your eligibility. Yes, Medicaid will know if you sell your house, but it’s also your responsibility to report the sale to Medicaid.

Understanding these mechanisms can help you plan your property sale while considering Medicaid’s guidelines, even if it means temporarily losing benefits until you requalify. Enrollment is open year-round, so you can reapply if your circumstances change. Let’s explore your options.

How Can I Sell My House and Keep Medicaid?

While your primary home is generally exempt from Medicaid’s asset limit, the proceeds from the sale usually are not. This money can count toward Medicaid’s asset limit and disqualify you from coverage. However, there are strategies to sell your house and keep Medicaid, requiring careful planning to ensure eligibility:

  1. Buy Another Primary Home: Use the proceeds from your sale to purchase another primary residence. Medicaid typically does not count your primary home as an asset. To keep your coverage, reinvest the proceeds into another primary residence promptly. The time window varies by state but is typically around three months. Check with your Medicaid agency for specific timeline requirements.
  2. Spend Down Excess Assets: If the sale results in excess assets, you can spend down these funds on non-countable or exempt items and services. Eligible categories can vary by state and might include paying off credit card debt, medical bills not covered by insurance, making repairs or improvements on an exempt home, prepaying funeral expenses, or buying or fixing a car deemed necessary for transportation. Spend-down rules are complex, so consulting a Medicaid specialist is advisable if you choose this path.
  3. Plan Ahead Before the Sale: Consult with a Medicaid planning professional or attorney. They can help you navigate the rules and ensure the sale proceeds do not jeopardize your eligibility. This might include setting up a trust or other planning strategies compliant with Medicaid regulations. Planning ahead by at least five years can be beneficial, as it falls beyond the Medicaid look-back period.

Can I sell My House Below Market Value while on Medicaid?

Selling your house below market value while on Medicaid can be risky. Such a sale within the look-back period might be seen as an attempt to reduce assets to qualify for Medicaid, resulting in penalties. It’s crucial to sell your home at fair market value or consult with a Medicaid planning expert to navigate this complex area without jeopardizing your eligibility.

Can Medicaid Sell My House?

No, Medicaid cannot sell or take your house if you live in it and your home equity interest is within the allowed limit. If you move to a nursing facility, you can submit a written “Intent to Return” statement to keep your house exempt under Medicaid rules. However, if Medicaid is covering your long-term care costs, the state may seek reimbursement from your estate after your death, which could include selling your home if it’s part of your estate. If a spouse or an adult disabled child is living in the home, the property is exempt from Estate Recovery.

What is “Intent to Return”

An “Intent to Return” declaration is a statement you can make if you are temporarily living away from your home, such as in a nursing facility, but plan to return to your primary residence. This declaration helps ensure that your home remains an exempt asset for Medicaid eligibility purposes, even if you are not currently residing in it.

Can Medicaid Take Proceeds from my home sale?

Medicaid cannot directly take proceeds from the sale of your home while you are alive. However, under the Tax Equity and Fiscal Responsibility Act (TEFRA) liens, the state can place a lien on your property if you are in a nursing home and not expected to return home. This lien can potentially affect the proceeds from your home upon your death.

Will Medicaid be involved in my home sale?

Medicaid will not directly participate in the sale of your home. However, because the sale affects your asset level, it can influence your Medicaid eligibility. Therefore, you must report the sale and adjust your eligibility status accordingly.

What are the best ways to spend down assests?

The most effective ways to spend down assets for Medicaid eligibility include paying off debt (such as a mortgage, car loan, or credit card balances), making home repairs, covering medical expenses not covered by insurance, prepaying funeral expenses, or paying for additional in-home care.

Can I buy a house while on Medicaid?

Yes, as mentioned earlier, you can buy a house while on Medicaid, but it must be intended as your primary residence. The value of your primary home is typically exempt from Medicaid’s asset limit, as long as it falls within your state’s home equity limit. However, purchasing a property other than your primary residence will count as an asset and could cause you to exceed your state’s threshold, disqualifying you from Medicaid.

Should We Sell the Home to Pay for Long-Term Care?

In most cases, your home is exempt from Medicaid’s asset limit, meaning it is not considered a countable asset and does not need to be sold to qualify for Medicaid. However, if you do sell the home, the proceeds from the sale will be counted toward Medicaid’s asset limit.

Bottom Line: Selling a House While on Medicaid

Selling your home can impact your Medicaid eligibility, but there are legal ways to use the proceeds and retain your benefits.

Whether you’re purchasing another home, spending down assets, or planning ahead, it’s crucial to stay informed and consider consulting with a Medicaid planning professional.

If you’re buying and selling a home simultaneously, explore Tony Buys Home’s innovative Buy Before You Sell program, which offers a streamlined, simplified, and more certain process.

More to know about Medicaid:

Understanding Home Sales and Medicaid Eligibility for Long-Term Care

There is considerable confusion about whether a home should be sold to pay for long-term care. This is understandable, as the questions are nuanced and the answers are complex, especially in the context of Medicaid eligibility and rules.

Consider the following scenarios:

  • If an elderly mother requires nursing home care, will she need to sell her home to qualify for Medicaid?
  • If a great uncle receives Medicaid-funded nursing home care and his house is sold, will he lose his Medicaid eligibility?
  • If a spouse is on Nursing Home Medicaid and the spouse at home wants to downsize by selling their home, will Medicaid still cover the nursing home care?
  • What happens if the home is already sold? Could this affect one’s ability to qualify for long-term care Medicaid?

A Simple, But Over-Simplified Answer

Generally, a home is not counted towards Medicaid’s asset limit, so it is not necessary to sell it to qualify for long-term care Medicaid. However, selling the home can result in “excess” assets, likely disqualifying one from Medicaid. Selling the home is usually only advisable if the individual is single, resides in a nursing home, and has no one to cover home maintenance costs.

Key Considerations

When thinking about selling a primary home, consider the following:

  1. Is the Home Exempt?: If the home is exempt from Medicaid’s asset limit, it does not need to be sold to qualify for Medicaid.
  2. Maintenance Costs: If the individual is single and a nursing home resident, are there funds available to maintain the home?
  3. Intent to Return: Does the individual plan to return home?
  4. Estate Recovery: Will the home be subject to Medicaid’s Estate Recovery Program after the beneficiary dies?

In most cases, the home is exempt from Medicaid’s asset limit, meaning it is not a countable asset and does not need to be sold to qualify for Medicaid. However, if the home is sold, the proceeds are counted towards Medicaid’s asset limit, likely causing the individual to exceed the limit and become ineligible for Medicaid. They will need to “spend down” the excess assets on care or other non-exempt assets until they are at or below their state’s asset limit before reapplying for Medicaid.

Medicaid’s Home Exemption Rule

Before considering selling your home, determine if it is an “exempt” asset. If it is exempt, it does not affect your Medicaid eligibility. A Medicaid applicant’s home is automatically exempt, regardless of where they live, if one of the following persons resides in the home: a spouse, a minor child (under 21 years old), or a permanently disabled or blind child (of any age).

For a single Medicaid applicant applying for Nursing Home Medicaid or home and community-based services via a Medicaid Waiver, there is a home equity interest limit for home exemption. Home equity is the difference between what is owed on the house and the home’s fair market value. Equity interest is the portion of the home equity owned by the applicant. In 2024, the home equity interest limit is state-specific, but generally is either $713,000 or $1,071,000. Additionally, those who do not live in their home (such as those residing in a nursing home) must have an Intent to Return home for it to remain an exempt asset. Without this intent, the home is no longer exempt, and they may need to sell it to qualify for long-term care Medicaid.

Considerations for Nursing Home Residents

For single Medicaid nursing home beneficiaries whose homes are exempt from Medicaid’s asset limit, maintaining the home financially may be challenging. While Nursing Home Medicaid has an income limit, usually $2,829/month in 2024, a nursing home resident cannot retain all their income once eligible for Medicaid. Nearly all of a nursing home resident’s monthly income, except for a Personal Needs Allowance (PNA), goes towards their care. The PNA amount is state-specific but minimal, ranging from $30 to $200/month, making home maintenance difficult.

There is a Home Maintenance Allowance, also called a Home Maintenance Deduction, intended for single persons expected to be in the nursing home temporarily, generally six months or less. This allowance helps financially maintain the home during the temporary absence. For this allowance, individuals must express an Intent to Return, and a doctor must certify that they likely will return home within six months. Most states limit the Home Maintenance Allowance to six months; if the resident does not return home within that time, the allowance ends. If no one can maintain the home financially, the individual may need to sell it.

Married Medicaid nursing home beneficiaries with non-applicant spouses are not eligible for the Home Maintenance Allowance. Instead, the non-applicant spouse receives a Monthly Maintenance Needs Allowance/Spousal Income Allowance from the applicant spouse, allowing them to maintain the home. Unlike the Home Maintenance Allowance, the Spousal Income Allowance is not time-limited.

Proceeds from Selling One’s Home

Medicaid has an asset limit, typically $2,000 in most states. While the home is generally exempt from Medicaid’s asset limit, the proceeds from selling the home are not and will be counted towards Medicaid’s asset limit. This will likely disqualify the individual from Medicaid due to having excess assets. The excess assets must be “spent down” on long-term care and non-countable assets before reapplying for Medicaid.

If the proceeds are reinvested into another Medicaid-exempt home within three months, they remain exempt. Any remaining proceeds not invested in a new home will count towards the asset limit. Additionally, if a Nursing Home Medicaid beneficiary is married and the home’s title is solely in the non-applicant spouse’s name at the time of the sale, the non-applicant spouse may keep the proceeds without impacting the applicant’s Medicaid eligibility. Assets in the name of the non-applicant spouse are not considered available to the nursing home spouse after the month they became eligible for Medicaid-funded nursing home care.

Given the complexity of this situation, consulting with a Medicaid Planning Expert is recommended before taking any action.

Selling the Home for Fair Market Value

It is vital to sell the home for fair market value, the estimated value if sold in the current market. Those requiring long-term care and lacking funds for such care may feel pressured to sell quickly. Many cash home-buying companies advertise quick cash sales but typically offer lower prices, making it unlikely to receive fair market value. At Tony Buys Homes, we have strategies that can help you with a quick sale and still maintain the fair market value.

Another common violation of fair market value occurs when an aging parent sells their home to their children at a discounted rate. This violates Medicaid eligibility rules and will likely result in application denial (a penalty period of ineligibility) or the loss of benefits for current Medicaid beneficiaries.

Selling a home for less than fair market value violates Medicaid’s Look-Back Period, generally 60 months preceding the long-term care Medicaid application. The Medicaid agency scrutinizes asset transfers during this period. If assets have been gifted or sold below fair market value, the individual faces a Penalty Period of Medicaid ineligibility. For example, if a home’s fair market value is $250,000 and it sells for $200,000, the $50,000 difference is considered a gift and violates the Look-Back Rule.

Medicaid’s Estate Recovery Program (MERP)

If you do not sell your home, it’s important to be aware of Medicaid’s Estate Recovery Program (MERP). While a long-term care Medicaid beneficiary’s home is generally exempt from Medicaid’s asset limit while they are alive, the home may not be protected after they die. Through MERP, a state’s Medicaid agency attempts to recover the cost of long-term care expenses paid for the deceased Medicaid beneficiary, often through the sale of the home.

Situations Where MERP Does Not Apply

MERP is not allowed in certain situations, including:

  • When there is a surviving spouse
  • When there is a minor child (under 21 years old)
  • When there is a permanently disabled or blind child (of any age)
  • When the Child Caregiver Exception or the Sibling Exemption applies

Financial Considerations

Even if a state’s Medicaid agency is reimbursed via MERP, the Medicaid-funded rate is less than the private pay rate. Therefore, the family typically pays less by not selling the home to cover long-term care costs upfront, and instead reimbursing Medicaid through the home’s sale later. Medicaid can never collect more than what was paid out.

If your home will be subject to MERP, consider the cost of maintaining the home while the Medicaid beneficiary is alive. In some cases, selling the home may be a better option to avoid the financial burden of upkeep.

While Medicaid’s Estate Recovery Program can reclaim expenses from the sale of the home after the beneficiary’s death, there are exceptions and financial considerations to keep in mind. Evaluate the potential costs and benefits carefully, and consult with a Medicaid planning expert to make the best decision for your situation.

What assets are exempt from Medicaid in Illinois?

In Illinois, IRAs (except for tax-preferred retirement accounts) are also counted. However, many assets are considered exempt (non-countable). Exemptions include personal belongings, household furnishings, an automobile, and typically one’s primary home.

What is the 5 year lookback period for Medicaid in Illinois?

When applying for Medicaid coverage for long-term care services, the state will review your and your spouse’s asset transfers during the “look-back period” to determine if any assets were transferred for less than fair market value. This look-back period spans five years, during which all asset transfers will be scrutinized.

How to avoid Medicaid estate recovery in Illinois?

However, the state cannot recover from the estate of a deceased Medicaid recipient if the recipient has a surviving spouse, a child under the age of 21, or a blind or disabled child of any age. Additionally, the state cannot recover from an estate valued at $25,000 or less.

How do I protect my assets from Medicaid in Illinois?

Medicaid Asset Protection Trusts (MAPT)

This type of trust enables individuals who might otherwise be ineligible for Medicaid to become eligible and receive necessary care, whether at home or in a nursing home. Assets placed in this trust are no longer considered the applicant’s property.