When a homeowner goes on Medicaid, that person is effectively moving to a plan where they will receive taxpayer dollars to pay for their healthcare. In this kind of scenario, it is illegal for the owner to give away any assets or sell them at less than market value. The argument is that these assets, when liquidated, can and should help pay for the person’s healthcare. In other words, a senior going on Medicaid cannot gift their home to a relative, leaving money from a possible sale on the table, and then turn around and expect taxpayers to pay for his or her healthcare. In many cases, the senior’s cumulative assets need to be used to pay for their healthcare first, before the individual can qualify for Medicaid payments.
Because of these restrictions, a person planning to go on Medicaid can neither bequeath their home to a relative nor offer a “price break” to a relative who wishes to purchase the house. The house must be sold for fair market value. Otherwise, the homeowner will be expected to cover the difference between the sale price and the value of the home out of pocket, before qualifying for Medicaid. As such, it is essential for a homeowner applying for Medicaid to get an accurate appraisal of their home’s value first.
This type of appraisal is reasonably straightforward. The appraiser will prepare a value estimate of the property, based on factors such as condition and comparable homes in the area. Once the appraiser has provided a figure for what the house is worth, the homeowner knows precisely what their list price should be. The homeowner cannot list the home for sale at a price below the appraised value without being expected to make up the difference. The homeowner must also accept any offer that is at least 90% of this assessed value.
In most cases, homes are exempt as Medicaid resources during the first 13 months that an individual is on Medicaid. Even if a single person goes on Medicaid and moves out of the home to live in a nursing home facility, he or she can keep the house for the first 13 months without penalty. After the grace period, the home becomes a Medicaid resource and must be sold in accordance with the appraisal/fair market value rules described above. The exception is if the homeowner holds equity in the home that exceeds $552,000. In such situations, the home becomes a Medicaid resource immediately, with no 13-month grace period.
Whatever the case, the smartest thing for a homeowner to do is to have an appraisal done before applying for Medicaid. That way, the homeowner knows where their obligations lie and whether they are required to liquidate their assets now or later. At Authority Appraisals, we offer these types of Medicaid planning appraisals—both to homeowners seeking Medicaid payments and to attorneys that specialize in assisting people with Medicaid planning. If you need help navigating the maze of Medicaid qualification and Medicaid resources or for more information please Contact Us. If you are ready to get started please complete our Order an Appraisal form and we will be in touch with you a free appraisal quote.