When applying for Medicaid nursing home coverage, an individual’s total assets have to comply with a very restrictive asset cap before Medicaid pays for nursing home coverage. This asset cap even requires that any gifts or below market transfers made within the previous five years still count as assets. This policy of including transfers made in the past five years is commonly known as the look-back period.
One exemption to the look-back rule is the Medicaid Child Caregiver exemption. If a child of a Medicaid applicant provides care to the applicant for two or more years prior to their admission to a nursing home, the applicant can transfer the home to the child caregiver without the value of the home counting toward the asset cap.
However, for several reasons, this exemption is neither as easy to obtain, nor as generous at it may appear.
First, this exemption is only available to the biological or adopted children of the Medicaid applicant. Grandchildren, nephews, nieces, and other relatives cannot serve as caregivers and receive this exemption.
Second, the child caregiver must move into applicant’s residence for at least the full two years when care is being provided. When claiming the exemption, the child caregiver has to prove that they moved in by providing proof such as tax returns, a state ID with the parent’s address, or other forms of documentation.
Third, the child caregiver must prove that they provided a level of care that delayed the need for the parent to move into a nursing home. This level of care must be proven through documentation by the caregiver and statements from witnesses who can back up the idea that but for the child caregiver, the parent would have needed to move into a nursing home sooner.
Also, some states may not allow the child caregiver to have outside employment while serving as a caregiver. These states view a caregiver having full-time, or in some instances significant part-time, outside employment as evidence that the level of care provided was not significant enough to warrant the exemption.
Fourth, the transfer of the house must be structured properly so as to ensure the house does not inadvertently remain a countable asset for the Medicaid asset cap.
Fifth, even if all the other conditions have been met, the financial benefits of this exemption are not as generous as they may seem. After a Medicaid recipient passes away, the state Medicaid agency places a claim on the estate for the value of the benefits received. Even though the parent’s house may be out of the estate, the parent’s estate will still have to use any remaining assets to payback Medicaid.
Even after the child caregiver takes title to their parent’s house, the child may face significant financial burdens beyond any lost income while providing care. Since the property is no longer in the parent’s name, the child would likely lose any property tax breaks available to seniors. Additionally, the child may face a significant capital gains tax if they sell the house since the tax would be based on the difference between price the house sells for and what their parent paid for the house.
As the above reasons make clear, applying for and receiving the child caregiver exemption can be a complex process. Given the complexity and limited benefit of the exemption, families should not attempt to plan for this exemption without first consulting with an experienced elder law attorney.
An elder law attorney could also advise clients about other courses of action that may be better suited to a client’s planning needs.
To discuss ways to protect your assets from a potential nursing home stay, please call Martha C. Brown & Associates at (314) 962-0186.