How Will Medicaid Know if I Sell My House?
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Richard Haddad Managing EditorRichard Haddad is the managing editor of HomeLight.com. He works with an experienced content team that oversees the company’s blog featuring in-depth articles about the home buying and selling process, homeownership news, home care and design tips, and related real estate trends. Previously, he served as an editor and content producer for World Company, Gannett, and Western News & Info, where he also served as news director and director of internet operations.
At HomeLight, our vision is a world where every real estate transaction is simple, certain, and satisfying. Therefore, we promote strict editorial integrity in each of our posts.
If you’re on Medicaid and you’ve decided you need to sell your home, you’re likely facing two big questions. Will I lose Medicaid if I sell my house? How will Medicaid know if I sell my house?
This guide breaks down how selling your home could affect your Medicaid eligibility and offers strategies for making plans and maintaining benefits.
How Much Is Your Home Worth Now?
Home values have rapidly increased in recent years. How much is your current home worth now? Get a ballpark estimate from HomeLight’s free Home Value Estimator.
Disclaimer: This post is meant for educational purposes, not financial advice. If you need assistance navigating Medicaid eligibility, HomeLight always encourages you to reach out to your own advisor.
Will I lose Medicaid if I sell my house?
The short blended answer is: not necessarily, but yes, it is possible. Medicaid evaluates your eligibility based on income and assets, and selling a home could indeed affect these figures. However, if the proceeds from the sale are used in a manner that Medicaid exempts, such as buying another primary residence, you may not lose your coverage.
The key is understanding how the sale affects your financial situation relative to Medicaid’s eligibility thresholds. The qualifying financial factors are means-tested through income and/or asset limits. The asset threshold is $2,000 in most states, which means selling your home will likely bring you well over Medicaid’s limit.
The most common exception that allows you to retain Medicaid eligibility after a home sale is to use the proceeds to purchase your new primary home. Generally speaking, a Medicaid recipient’s principal residence is a non-countable (exempt) asset. (More on this below.)
You can check your state eligibility requirements through Medicaid’s interactive map.
How will Medicaid know if I sell my house?
When you applied for Medicaid, you were required to disclose all assets, including real estate. Medicaid has systems in place to monitor any changes in your assets. This includes coordinating with other federal and state agencies to track asset changes in order to approve your Medicaid redetermination or renewal.
Here’s how they’ll find out:
- Public records: Property sales are a matter of public record, which Medicaid can access to verify changes in your assets.
- Financial disclosures: When you renew your Medicaid coverage (generally every 12 months), you’re required to disclose your financial situation, including any real estate transactions.
- Coordination with other agencies: Medicaid works in conjunction with other state and federal agencies that can notify them of significant asset changes.
As you make plans to sell or transfer ownership of your home, keep in mind that Medicaid’s objective is to assist those with a genuine need. Honesty and transparency are the best policies to maintain your eligibility. Yes, Medicaid will know if you sell your house, but it’s also your responsibility to report your home sale to Medicaid.
Understanding these mechanisms can help you plan your property sale while considering Medicaid’s guidelines, even if it means losing benefits for a short time until you are able to requalify. Enrollment is open year-round, so you can reapply if your circumstances temporarily change. Let’s look at some of your options.
How can I sell my house and keep Medicaid?
While your primary home is generally exempt from Medicaid’s asset limit, the capital gains or proceeds from the sale, in most cases, will not be exempt. This money can count toward Medicaid’s asset limit and disqualify you from coverage.
However, there are some options to sell your house and keep Medicaid. These require careful planning to ensure you remain eligible for benefits. Here are strategies to consider:
1. Buy another primary home
You can use the proceeds from your sale to purchase another primary residence. Medicaid generally does not count your primary home as an asset in determining eligibility. However, to keep your coverage, you must reinvest the proceeds into another primary residence in a timely manner. The time window can vary by state, but it is typically around three months. Check with your Medicaid agency about timeline requirements.
2. Spend down excess assets
If the sale of your home results in excess assets, which it probably will, you can spend down these funds on non-countable or exempt items and services. Eligible categories can differ depending on the application of policy and spend-down time limits in your state. These 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 even buying or fixing a car that’s considered vital functional transportation. Spend-down rules are complicated, so you will want to consult with a Medicaid specialist if this is the path you choose.
3. Plan ahead before the sale
Consider consulting with a Medicaid planning professional or attorney. They can help you navigate the rules and ensure that your sale proceeds do not jeopardize your eligibility. This might include setting up a trust or other planning strategies compliant with Medicaid regulations. There is even value in planning ahead five years, which would be beyond the Medicaid look-back period.
When married, a home is typically a joint asset
When it comes to your home as an asset, in most cases it does not matter whether your name or your spouse’s name is on the deed. Even if only one name is on your home’s title, all property assets of married couples are typically considered joint assets by Medicaid.
Whatever strategy you choose, HomeLight recommends you consult a Medicaid planning expert before selling your home.
Can I gift my house instead of selling it?
Gifting your house to someone else might seem like a viable strategy to preserve Medicaid eligibility, but it’s crucial to understand the implications. Medicaid applies a look-back period of 60 months in most states, during which any transfer of assets for less than fair market value may result in a penalty period, delaying your eligibility for Medicaid benefits.
However, some scenarios exist where gifting your house is possible without losing your eligibility. Medicaid will allow asset transfer exceptions if you transfer home ownership to:
- To the applicant’s spouse: Transferring your home to your spouse does not affect Medicaid eligibility.
- To a child under age 21: This transfer is exempt from penalties.
- To a blind or disabled child: Another exception that allows for the transfer without affecting Medicaid eligibility.
- Sibling with part ownership: If you have a brother or sister who owns part of the home and has lived there for at least 12 months, the transfer may not impact eligibility.
- Caregiver child exception: If your child has lived in the home for at least two years prior to your applying for Medicaid and provided care that delayed your move to a nursing home, the transfer to this child may be exempt.
Medicaid has a home equity interest limit
For 2024, Medicaid has set a home equity interest limit of $712,000 to $1,071,000, varying by state (California has no limit). This means if your equity in the home exceeds this limit, you may not qualify for Medicaid. However, there are exceptions, particularly if your spouse or another dependent relative lives in the home. To learn more and see the home equity interest in all 50 states and Washington, D.C., visit this link.
FAQs about Medicaid and home sales
Selling your house below market value can be risky when you’re on Medicaid. Such a sale within the look-back period could be viewed as an attempt to reduce your assets to qualify for Medicaid, leading to penalties. It’s essential to sell your home at a fair market value or consult with a Medicaid planning expert to navigate this complex area without jeopardizing your eligibility.
No, Medicaid itself cannot sell or take your house if you live in it and your home equity interest is under the allowed value. If you are moving to a nursing facility, you can submit a written “Intent to Return” home statement so your house will remain exempt under Medicaid rules. However, if you are receiving long-term care and Medicaid is covering these costs, the state may seek reimbursement from your estate after your death, which could include the sale of your home if it’s part of your estate. If a spouse or grown disabled child is living in the home, the property is exempt from Estate Recovery.
“Intent to return” is a declaration you can make if you are temporarily living outside your home (e.g., in a nursing home) but intend to return to your primary residence. This declaration can help ensure your home remains an exempt asset for Medicaid eligibility purposes, even if you are not currently living in it.
Medicaid cannot directly take proceeds from the sale of your home while you are alive. However, under the TEFRA (Tax Equity and Fiscal Responsibility Act) liens, the state can place a lien on your property if you are in a nursing home and not expected to return home, potentially affecting the proceeds upon your death.
Medicaid will not be directly involved in the sale of your home. However, the sale impacts your asset level and can affect your Medicaid eligibility, so it’s indirectly involved through the necessity of reporting the sale and adjusting your eligibility status.
The best ways to spend down assets for Medicaid eligibility include paying off debt (a mortgage loan, car loan, or credit card balances), home repairs, medical expenses not covered by insurance, prepaying funeral expenses, or paying for additional care at home.
Yes, as noted above, you can buy a house while on Medicaid, but the home must be intended as your primary residence. The value of your primary home is usually exempt from Medicaid’s asset limit, provided it’s within the home equity limit applicable in your state. Purchasing a property other than your primary residence will be considered a countable asset, causing you to exceed your state’s threshold. This will disqualify you from Medicaid.
Bottom line: Selling a house while on Medicaid
Selling your home can affect your Medicaid eligibility, but there are lawful ways to use the proceeds and maintain benefits.
Whether you’re buying another home, spending down assets, or planning ahead, it’s important to stay informed and consider consulting with a Medicaid planning professional.
If you’re buying and selling a home at the same time, check out HomeLight’s innovative Buy Before You Sell program, which provides a streamlined, simplified, and more certain process.
Header Image Source: (Jewkesdesign/ Pixabay)
- "How an “Intent to Return Home” Can Protect Your Home While Maintaining Medicaid Eligibility", Medicaidlongtermcare.org (January 2024)
- "How an “Intent to Return Home” Works: Qualifying for Medicaid and Protecting the Home", American Council on Aging (February 2024)
- "Medicaid Estate Recovery Programs: When Medicaid Can and Cannot Take One’s Home", American Council on Aging (February 2024)
- "Medicaid Caregiver Child Exemption: Transferring a Parent’s Home to an Adult Caregiver Child without Medicaid Penalty", American Council on Aging (November 2023)
- "Transferring a Home to a Sibling Without Jeopardizing Medicaid Eligibility", American Council on Aging (November 2023)
- "Support Your Child With Disabilities — and Still Qualify for Medicaid", The Academy of Special Needs Planners (June 2022)
- "Know the law regarding Medicaid transfers", Wolters Kluwer (October 2020)
- "Understand Medicaid’s Look-Back Period; Penalties, Exceptions & State Variances", American Council on Aging (January 2024)
