Selling a home is a significant financial event, especially when you’re receiving Medicaid benefits. One question we often hear is whether selling a house could affect Medicaid eligibility. In Massachusetts, MassHealth has strict rules around income and assets, and selling your home can put those benefits at risk if not handled properly. Understanding what’s at stake and how to plan ahead can help you make informed decisions without losing coverage.
When a Home Is Exempt Under Medicaid Rules
In most cases, your primary residence is not counted as an asset when applying for Medicaid. This exemption applies only if:
- You live in the home or intend to return to it.
- Your spouse or certain qualifying relatives (like a minor or disabled child) live there.
- Your equity in the home is under a specific limit, which is adjusted annually.
The exemption helps people maintain their homes while receiving care. However, this protection is tied to the home itself, not to cash received if you sell it. It’s also important to note that MassHealth may try to recover costs after death through estate recovery, which often includes the home.
What Happens When You Sell the Home?
When you sell your primary residence, the exempt status ends. The cash proceeds from the sale become a countable asset. This can quickly put someone over the Medicaid asset limit, which in Massachusetts is just $2,000 for a single individual receiving long-term care benefits.
If that happens, Medicaid benefits may stop until your assets are spent down below the threshold. Selling a home during or shortly before applying for benefits can create unintended consequences if you’re not working with an elder law attorney.
The timing of the sale, how the funds are handled, and whether the transaction is part of a larger planning strategy all matter.
Spend-Down and Reinvestment Options
The good news is that proceeds from a home sale can be used in ways that don’t necessarily disqualify you from Medicaid. This is called a “spend-down.” It means using excess funds on approved expenses until your countable assets are below the limit.
Examples of Medicaid-allowable spend-downs include:
- Paying off outstanding debts
- Purchasing a more accessible or smaller home to live in
- Making home modifications for health or mobility needs
- Buying an exempt vehicle
- Prepaying for funeral and burial expenses
- Covering medical or caregiving expenses
Each of these options has specific rules. For example, you can’t give money away or transfer assets to family without triggering a penalty. And any purchases must be at fair market value. Before spending down, it’s wise to speak with an attorney who understands MassHealth rules.
Transfer Penalties and Look-Back Period
Massachusetts enforces a five-year “look-back” period for MassHealth applicants. That means the state will examine all transfers of property or assets made within five years before you apply.
If you transferred your home for less than fair market value, such as giving it to a child or sibling, this could result in a penalty period of ineligibility. The penalty is based on the value of the gift and the average monthly cost of nursing home care.
Selling the home for fair market value is not penalized, but what you do with the proceeds could be. Giving away the money or placing it into certain types of trusts may lead to a denial of benefits unless it qualifies for an exemption.
Exempt Transfers and Caregiver Child Exception
There are a few limited situations where transferring a home or sale proceeds will not trigger a penalty. These include transfers to:
- A spouse
- A child under age 21 or a child with a permanent disability
- A sibling with an equity interest in the home who lived there for at least one year
- An adult child who lived in the home for at least two years and provided care that delayed your need for nursing home care (known as the “caregiver child” exception)
These are not automatic exemptions—you must provide documentation that meets MassHealth’s requirements. But when used correctly, they can be part of a legal strategy to preserve assets.
Planning Ahead Before a Sale
If you’re thinking about selling your home while receiving or applying for Medicaid, don’t act without a plan. Selling the house doesn’t automatically disqualify you, but what happens next matters.
In many cases, planning tools such as irrevocable trusts or planned spend-downs can help preserve eligibility. However, these strategies often need to be implemented well in advance of the sale or application. Acting early gives you more options.
Protecting Your Medicaid Eligibility
Selling a home can create complications for Medicaid recipients, but it doesn’t have to result in lost benefits. With careful planning, you can remain eligible and use the sale proceeds in a way that meets your needs.
At Surprenant, Beneski & Nunes, P.C., we help individuals and families in Massachusetts make smart decisions about long-term care, asset protection, and Medicaid planning. Contact us today to learn how we can support your goals.