When you apply for Medicaid, your application is subject to a review of your spending. This is known as the five-year look-back period. During that period, Medicaid checks for ways in which you might have spent money that could have been used to help with your current medical care.
For example, if you signed your $115,000 house over to your child within the last five years, Medicaid would temporarily penalize you by delaying your coverage start date. They do this because you could have sold the house to help pay for your care. Once the penalty period passes, your Medicaid coverage would begin.
Medicaid’s caregiver-child exemption
There is an exception known as the “caregiver child exemption.” This allows you to transfer your house to your child without penalty if they have been caring for you full-time in your home. According to the legislature in the state of New Jersey, your child would have to quit their job to take care of you full-time. Under these circumstances, you can transfer the house to them without penalty after two years of them providing ongoing care.
The state of New Jersey may require that your child provide tax returns for the past two years during the five-year look-back period. If they see that your child has worked outside of the home while taking care of you, the exemption would not apply.
What types of home transfers are acceptable?
Under the “caregiver child exemption,” there are two types of home transfers that are acceptable:
- Outright transfers allow for the patient to transfer the home to their child without any expectation that the parent will continue to live there.
- Retaining a life estate is also acceptable. This means that the house is transferred to the child, but the parent still lives there, too.
The ins and outs of qualifying for Medicaid can be overwhelming. That’s why it makes sense to seek assistance with your real estate transfers.