Estate recovery is a process in which the government tries to recover funds paid out by Medicaid for long-term care costs or other medical expenses. Medicaid is a program designed to provide medical coverage for the poor, but it has become widely used by seniors to pay for nursing home costs. After a senior dies, Medicaid recovery allows the government in some circumstances to get back the money paid out for nursing home care or other costs from the estate that the deceased has left behind.
Many people who depend on Medicaid to cover their long-term care costs do not want to have their hard-earned property and assets lost to Medicaid recovery, preferring to leave the money and assets to their children or other heirs. If you are in this situation, you may wonder whether it is a good idea to add your child’s name to the title of your house in order to avoid the home being lost.
Adding Your Child’s Name to The Title of Your Home
The rules for Medicaid recovery vary by state, but in general it is NOT a good idea to add your child’s name to your home’s title in order to avoid your home being put at risk in a Medicaid recovery effort.
There are many reasons why simply adding your child’s name to your home title is a very bad idea. For one thing, it can trigger significant tax implications and may create a tax liability when the property is sold. However, there are also other serious problems with adding your child’s name to the home title.
The biggest issue in making this choice is that adding your child’s name to your home’s title can be considered a gift. If you give a gift to your children like this, it can create problems with the five-year Medicaid look back period. When you apply for Medicaid to cover your nursing home costs, Medicaid will look back at the last five years to see if you have given away money or assets. If you added your child’s name to your home, which is seen as a gift, this will make you ineligible for Medicaid for a designated time-period depending upon the value of the gift. Becoming ineligible for Medicaid can be disastrous under any circumstances if you need the money to pay for a nursing home. In many states, including Florida, your home is protected from the Medicaid spend-down rules anyway.
In Florida, the Constitution also establishes a homestead exemption so your homestead can pass to your heirs and not be taken as a result of Medicaid recovery. In other words, your home is exempt from estate recovery in Florida.
While the Medicaid recovery rules differ, joint ownership or joint title of property won’t necessarily protect the asset from being targeted in a Medicaid recovery. In some states, your efforts to protect your home through joint ownership won’t work if the joint property rules don’t exempt the house.
To ensure you avoid mistakes and make smart choices in Medicaid planning, it is best to consult with an elder law attorney for help.