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Estate Recovery Act requires equity on couple's home be used to pay SNF after death of 2nd spouse. In the meantime, 2nd spouse wants to sell in a J/T/R/O/S - joint tenancy right-of-survivorship state. Typically property can be sold and laws acknowledge each spouse owns 50% equity which they can invest together or invest as individuals.
Medicaid says spouse's SHARE OF assets will not count toward ELIGIBILITY for Medicaid. So spouse qualifies for SNF. Non-institutionalized spouse wants to keep 50% proceeds of the couple's equity as an individual asset. Put another way, we don't know if 100% of the sales proceeds must be paid to the state.
Estate Recovery outcomes for the spouse's 50% share realized WITHIN the surviving spouse's lifetime just isn't evident.

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Pam is spot-on about the clusterF that will happen if the house is sold.

Really dealing with medicaid can be complicated for those with community spouse issues. See an elder law attorney asap, I would get one who is NAELA certified.
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Oh it is much worse than that. Mom will sell the house and half the proceeds then become Dad's income and the Medicaid stops immediately. You then go through a spend down period AGAIN.
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