Caretaker Child: A Special Medicaid Exemption

In order to qualify for Medicaid benefits in a nursing home, it is commonly understood that assets must be transferred 5 years in advance to be protected. However, there are special exemptions to this rule that may apply, which can have a dramatic impact on planning.

One such exemption is the Caretaker Child exemption.  This exemption allows a Medicaid applicant to gift their home to a child with no Medicaid penalty whatsoever, provided that the child lived in the home with the applicant for 2 years prior to the applicant’s admission to a nursing home.  In order to protect the value of the home from a Medicaid lien or spend-down, the deed must be re-titled in the child’s name.  This is true even if the child did not actually provide care for the parent.  Under the law, it is assumed that the child provided some assistance to the parent which allowed the parent to remain living in the community.

It is important to note that the home can only be transferred to the Medicaid applicant’s child.  This exemption does not apply to transfers to other relatives that may have lived with and cared for the applicant, such as an in-law, a grandchild, a niece or nephew, or a step-child.  The Medicaid application must include the child’s birth certificate and proof that the child resided in that home for at least 2 years prior to the parent’s nursing home admission.  This can typically be documented by providing the child’s tax return evidencing that legal address.  Even if the applicant’s child has moved their own family into the home, the transfer of title can only be to the child and not the child and his or her spouse.

It is very important to remember that the house must actually be transferred to the caretaker child.  The fact that the child has lived in the home - no matter how many years - is not enough to protect the asset from a Medicaid lien.  A new deed must be signed transferring title to the name of the caretaker child.