Man Holding a House Miniature


Laura Blumenstiel, J.D. March 11, 2024

Navigating the Medicaid system can be overwhelming, especially for the elderly and their caregivers. Medicaid is a government-funded health insurance program for low-income and disabled individuals. It provides coverage for medical expenses such as hospital stays, doctor visits, prescription drugs, and long-term care services.

For those who are worried about losing their family home and life savings to Medicaid, there is hope. There are estate planning and Medicaid planning strategies you can use to preserve your assets in the present and also for the future.

In this article, we will explore how you can keep Medicaid from taking your house so that you feel financially secure today while still having a viable plan of action for tomorrow.

What is Medicaid Estate Recovery?

When someone receives Medicaid benefits for long-term care or other covered services, the state may place a lien on their home to recover the costs after they pass away. Unfortunately, this means that many families have to sell the house and settle the claim before they receive any inheritance. This process is known as Medicaid estate recovery.

While this may seem like a daunting possibility, there are certain circumstances where your home may not be subject to Medicaid estate recovery. Let's explore some strategies you can use to keep your house safe from potential Medicaid liens.

Protect Your Home with an Estate Plan

Estate planning involves organizing your assets, deciding who will inherit them after your death, and protecting those assets for the future. It is a crucial step in protecting your assets from Medicaid estate recovery. The earlier you meet with an estate planning attorney and draft documents the better. When applying for Medicaid, the county Job and Family Services department will determine eligibility by analyzing your bank statements and other financial records from five years prior. This is known as the “lookback period”. You will be required to explain any transaction that appears to be an improper transfer. It is important to start the Medicaid process early to avoid improper transfers during the lookback period.

Transferring Home Ownership

One option is to transfer ownership of your home to someone else, such as a family member or trust. This can be done through a special deed or by setting up an irrevocable trust. However, it's important to note that this transfer must be made at least five years before you apply for Medicaid. Otherwise, it may be considered an improper transfer and could still be subject to estate recovery.

Another option is to create a life estate in your home. A life estate, sometimes called a right of occupancy, is a legal agreement that allows a property owner to split their ownership interest in the property. The other owner you designate in the lift estate cannot take possession of it until you die. You may use and enjoy the property during your lifetime, and automatically transfer the property to another individual at their death. Once this happens, the state of Ohio will not be able to recover the property for Medicaid expenses. The new owner can make decisions about the property. This strategy should be completed at least five years before you need Medicaid. Tax implications should also be considered.

Utilize Irrevocable Trusts for Asset Protection

An Irrevocable Medicaid Trust can be set up to protect your assets, including your home, from being counted towards Medicaid eligibility. This type of trust must also be created at least five years before applying for Medicaid. It allows you to retain control over the property and receive income from it, while still shielding it from potential Medicaid liens. However, once the assets are transferred to the trust, they cannot be taken back or used for personal benefit.

This strategy better protects your assets than simply giving them to your children outright. You can set your children up as beneficiaries of the trust and include language in the document that determines when and how they will obtain trust assets.

Other Considerations

Aside from estate planning strategies, there are some other ways you can protect your home from Medicaid estate recovery. These include purchasing long-term care insurance and certain Medicaid-compliant annuities. It's important to consult with an estate planning attorney and financial advisor before making any major decisions regarding your assets and Medicaid eligibility. They can help you understand the potential consequences and find the best solutions for your unique situation.

Common Medicaid Planning Mistakes to Avoid

When it comes to protecting your family home from Medicaid, there are some common mistakes you should avoid. These include:

  • Waiting too long to start planning: As mentioned earlier, the lookback period for Medicaid eligibility is five years. It's important to start planning as early as possible to avoid improper transfers during this time.

  • Not seeking professional help: Medicaid rules and regulations can be complex and confusing. It's important to seek guidance from an experienced estate planning attorney and financial advisor who can help you navigate the process and avoid costly mistakes.

  • Trying to hide assets: This is known as Medicaid fraud and can result in severe penalties. When meeting with an attorney or caseworker, be transparent about all of your assets. There may be legal ways to protect them without resorting to fraud.

By avoiding these mistakes, you can better protect your home and assets from Medicaid estate recovery. By utilizing proper planning techniques, you can feel financially secure in the present and have peace of mind for the future. Take the time to consult with professionals and create a solid plan that fits your individual needs and goals. Call our office at 614-389-9711 to schedule a meeting with a qualified Medicaid planning attorney.

Want to learn more about Medicaid and long-term care planning? Download our free eBook, Aging with Confidence, here.

About the Author

Having earned her law degree in 1997, Laura Blumenstiel has nearly three decades of legal experience. She is deeply committed to providing compassionate and effective legal services for our clients. Each day, she finds fulfillment in meeting with clients and meticulously crafting trusts and estate planning documents. Additionally, she works diligently on estate administration through probate court proceedings. She's passionate about helping individuals and families plan for the future and guiding them through the probate process during difficult times. She strives to make a genuine connection with all her clients.