Life Care Planning Reed: Big mistake: Selling the house

Sandra W. Reed
Special to the Reporter
Sandra Reed

Joyce and Jan own their home outright. They wish to adjust their financial affairs to be able to qualify for Medicaid should one of them need long-term care in a nursing home. They have heard that one cannot qualify for Medicaid if they own a home. They have contacted a Realtor to list their home and plan to move into an apartment. Are they making a mistake?

Homestead of Medicaid applicant is an exempt asset

Joyce and Jan are making a big mistake. If the Medicaid applicant has the intent to return to the homestead (even though that may not be medically probable), the homestead is not a countable resource, which would prevent qualification for benefits. Joyce and Jan can keep their homestead and still qualify for Medicaid.

In selling the home, Joyce and Jan would be turning an exempt asset into a countable one. The cash they net from sale of the homestead counts against their qualification for Medicaid. They would have to spend down the proceeds from the sale to $2,000 or less in order to meet the Medicaid asset guidelines.

Enhancing homestead to assist qualification for Medicaid

If Joyce and Jan have saved more than they need for living expenses, they can make improvements to the homestead that would make it more livable for the spouse who remains at home when the other goes into the nursing home. Doing this converts that countable cash into a non-countable asset. For instance, they might add a downstairs bedroom. They might remodel bathrooms to make them wheelchair accessible. They might convert a bathtub into a shower that can accommodate a wheelchair.

Solutions for upkeep of homestead if needed

Should Jan and Joyce be short of cash for upkeep of the house, they can consider these solutions: (1) convey the home to children via a Lady Bird Deed, retaining a life estate in the property with the children paying for the upkeep; (2) a family member or trusted friend could move in rent-free in exchange for paying property taxes, homeowner’s insurance, utilities and maintenance; or (3) rent out the homestead, although, in this case, the rent in excess of maintenance cost is income that must be paid to the nursing home.

Sandra W. Reed practices Elder Law in Somervell County, handling probating of estates, drafting of wills, trusts, powers of attorney and deeds as well as estate and Medicaid planning.  She lives on beautiful Chalk Mountain and can be reached at (254) 797-0211; (817) 946-2809 or at