The home is one of the biggest assets you are allowed to own and still qualify for Medicaid coverage of your nursing home bills. Under recent federal law effective Jan. 1, 2006, the equity in your home will be completely exempt from counting against you for Medicaid eligibility purposes, if your equity does not exceed $500,000. (Under the federal law, each state has the option of adopting a higher exemption, up to $750,000.) In addition, if your spouse continues to live in the house, it will be exempt no matter how much it is worth.
Of course, if your spouse is living in the home, it will be exempt no matter what your "intent" may be.
Find a Nursing Home »
But what if you're not married, and you're in a nursing home? Who pays the real estate taxes, the homeowner's insurance, the heat and other necessary upkeep? The general rule is that you must turn over all of your income to the nursing home, before Medicaid will pay for the nursing home bill. So generally, you cannot use your income to pay for these household expenses.
There is an exception for the first six months you are in the nursing home, if you can be reasonably expected to return home within this period of time. If such is the case, the federal rules permit you to deduct a limited amount each month to pay for certain house-related expenses, including rent or mortgage.
After the first six months, there are several options. First, your family members may have to pay these bills, to protect what they hope and expect will eventually pass to them following your death. Accurate records should be kept documenting who paid what and when, so that should they inherit the house as planned, everyone's share can be adjusted fairly based on what they paid in during your lifetime.
Second, you can rent out the house. This is often a good idea if family members simply do not have the cash to pay the real estate taxes and other monthly upkeep costs out of pocket. A local management company should be used to supervise the rentals and take care of emergencies (calling the plumber on a weekend, etc.). In truth, you should not be overly concerned as to the cost of such a company, since all of the net income from your rent simply goes to the nursing home anyway, saving the Medicaid program money, not your family!
Accordingly, it would be better to charge a little less rent if that ensures a responsible tenant, since your goal is simply to cover the ongoing carrying costs of the house, not make a profit.
Finally, don't forget that there is little point in your family paying for the upkeep of the house if it will have to be sold to repay the state under the Medicaid "estate recovery" program following your death.
K. Gabriel Heiser is an elder law attorney and author of "How to Protect Your Family's Assets from Devastating Nursing Home Costs: Medicaid Secrets."
Read his full biography