The Medicaid eligibility rules are voluminous and rather complicated (which is why I specialize in this area...it's sort of dangerous to dabble in it once in a while). If you ever have trouble sleeping one night, you may want to flip through the State's Uniform Policy Manual which contains all of Connecticut's rules and policies regarding Medicaid. Most of my clients know before they meet with me that they would be penalized for gifts they make that are close to the date that the apply for Medicaid. They also know that there is a look-back period which was recently extended by new laws at the Federal level. But very few of my clients know about the "Caretaker Child" rule (see ยง3028.10 A of the UPM ). It's not a rule that applies to all of my clients, but you would be surprised how often it becomes relevant.
Contrary to popular opinion, the State of Connecticut does, in fact, have a heart. The State has effectively decided that if a child moves in with mom or dad and then provides enough care to keep mom or dad out of a nursing home for the two-year period leading up to mom or dad's institutionalization, then the child deserves to own the house. In other words, mom or dad is allowed to transfer ownership of the house to the caregiver child without any negative Medicaid ramifications. DSS typically requires that mom or dad's physician submit a letter indicating that if it were not for the caretaker child's efforts then mom or dad would have been permanently placed in a nursing home at least two years ago.
The general rule is that you will probably have major Medicaid eligibility problems if you transfer your house to a non-disabled child within 5 years of applying for Medicaid. The caregiver child rule is an exception to this general rule.
But please note that although this would be an "exempt transfer" under Medicaid rules, you will still have unfavorable gift tax and capital gains tax issues (to be addressed in more detail in future posts) to deal with.
So...remember that if want to protect your house and you have a child living with you and taking care of you, then you may have a very valuable Medicaid rule you can take advantage of.
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