Dispelling Myths about Home Ownership and Medicaid

Introduction
Medicaid covers millions of Americans, and its complex rules change by state and get updated annually. In these circumstances, pieces of misinformation get repeated until they become false myths. This is especially true for senior homeowners, who may have heard they will have to sell their home to qualify for Medicaid, or that Medicaid might simply take the home from them, their spouse or their heirs. None of these things are guaranteed to happen. However, any of them could happen unless seniors follow the Medicaid rules and exemptions that let homeowners qualify, protect non-applicant spouses and preserve the home as a family inheritance.

How Homeowners Can Qualify for Medicaid

The Truth: Many homeowners can qualify for Medicaid because many homes are exempt from Medicaid’s asset limit.

The asset limit is $2,000 for an individual in most states in 2026, so homeowners probably won’t be able to qualify if the home is counted. However, the primary residence of a Medicaid applicant or beneficiary can be exempt if:

• The Medicaid applicant/beneficiary lives there and meets the state’s home equity interest limit. Home equity interest is the portion of the home owned by the applicant/beneficiary minus any outstanding debt. The home equity interest limit in most states in 2026 is either $752,000 or $1,130,000.
• The applicant/beneficiary’s spouse, minor child or blind or disabled child of any age lives there. In these cases it does not matter where the Medicaid applicant/beneficiary lives or what their home equity interest is.
• The Medicaid applicant/beneficiary meets the state’s home equity interest limit and files an intent to return home statement. This is an official document declaring the applicant/beneficiary considers the home their primary residence and plans on living there again if they are able.

These exemptions only apply to the primary residence of the Medicaid applicant/beneficiary. They do not apply to second or vacation homes, which will be counted toward the asset limit, and there are different rules for rental properties. Plus, the home equity interest limit only applies to Nursing Home Medicaid and Home and Community Based Services (HCBS) Waivers. It does not apply to anyone receiving long-term care via regular Medicaid for seniors. It should also be noted that there is no home equity limit in California, so owning a home will not prevent California residents from qualifying regardless of the home’s value or the seniors home equity interest.

Placing a home in a Medicaid Asset Protection Trust (MAPT) can also keep it exempt from the asset limit. However, using a MAPT violates the Look-Back Period, so it would need to be created and utilized at least five years before applying for Medicaid for them to be a viable planning strategy. That’s because the Look-Back Period is five years long in most states.

Protecting the Home as an Inheritance

The Truth: The home can be preserved for heirs by protecting it from Medicaid Estate Recovery.

States are required to try and collect reimbursement for Medicaid long-term care expenses after the death of Medicaid beneficiaries. They do this via the deceased beneficiary’s estate, a process known as Medicaid Estate Recovery. For Medicaid recipients who were homeowners, the home is often the most valuable asset in the estate, and recovery will often be attempted via the sale of the home.

However, there are several ways the home can be protected from Medicaid Estate Recovery. First and foremost, a surviving spouse prevents all recovery, including via the home. The home is also protected from estate recovery if the Medicaid recipient’s minor child (21 or younger) or blind or disabled child of any age lives in the home.

A Lady Bird Deed can protect the home from recovery in the following states – Texas, Florida, Michigan, West Virginia and Vermont. In these states, the home passes directly to the beneficiary named in the Lady Bird Deed as soon as the Medicaid recipient passes away, so the home is no longer part of the Medicaid recipient’s estate and can’t be subject to recovery. Placing the home in a Medicaid Asset Protection Trust (MAPT) can also protect it from estate recovery. However, as mentioned above, MAPTs violate the Look-Back Period, so they would need to be created and utilized at least five years before applying for Medicaid (in most states) to be a practical planning strategy.

Transferring the home to qualified family members using either the Child Caregiver Exemption or the Sibling Exemption can prevent recovery, as well. We will detail these two exemptions in the next section.

Home Transfer Exemptions

The Truth: Certain exemptions and trusts let Medicaid applicants transfer home ownership in order to qualify.

The Child Caregiver Exemption and the Sibling Exemption allow Medicaid applicants to transfer their home to qualified family members without violating the Look-Back Period. These transfers make the home exempt from the asset limit since it no longer belongs to the applicant/beneficiary.

The Child Caregiver Exemption can be used if the Medicaid applicant/beneficiary has an adult child who has been living in the home for at least two years before their parent started receiving Medicaid long-term care and during that time they provided their parent with care that prevented them from needing nursing home coverage or any other state healthcare assistance. The adult child must be biological or adopted.

The Sibling Exemption can be used if the sibling who owns a portion of the home and they have been living in the home for at least two years before the Medicaid applicant/beneficiary started receiving Medicaid long-term care. The sibling must be biological or adopted.

Using a Medicaid Asset Protection Trust (MAPT) will also keep the home from counting against the asset limit, and the home will be passed to whoever the MAPT names as beneficiary after the death of the person who created the MAPT – the homeowner/Medicaid applicant. As we’ve discussed, MAPTs violate the Look-Back Period, so they would need must be created at least five years before applying for Medicaid (in most states) to be a viable option.

Spousal Protections

The Truth: Medicaid will never kick a spouse out of a home, and it has several other protections for spouses who are not applying for or enrolled in Medicaid, known as non-applicant or community spouses.

We’ve already discussed two of the home protections for spouses – 1) the home is always exempt from the asset limit for eligibility if the Medicaid applicant/beneficiary’s spouse lives in the home; 2) the home is protected from Medicaid Estate Recovery as long as the beneficiary’s spouse is alive.

It should also be noted that while the assets of married couples are considered jointly owned during the application process, the assets of a non-applicant, non-beneficiary spouse (also known as the community spouse) are not counted toward the beneficiary’s asset limit during the annual Medicaid Renewal process. So, a couple could put their home in the community spouse’s name and then sell it one month after the applicant spouse has started receiving Medicaid benefits without impacting the beneficiary’s eligibility. This would allow the community spouse to do whatever they want with the house. They could continue to live there, or they could sell it and do what they want with the proceeds. If the couple sold the house before the applicant spouse was enrolled, however, the proceeds would have counted against their asset limit.

Medicaid offers two more financial protections for community spouses that are not directly related to homes, but they’re still worth mentioning – the Community Spouse Resource Allowance and the Monthly Maintenance Needs Allowance (MMNA). The CSRA lets the community spouse keep up to $162,660 in assets (as of 2026 and depending on the state) without impacting the applicant spouse’s Medicaid eligibility. The MMNA lets Medicaid applicants/beneficiaries keep extra income so they can transfer it to a low-income community spouse. Depending on the state and the situation, the community spouse can have up to $4,066.50/month in income without jeopardizing the Medicaid eligibility of the beneficiary spouse.