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Caring for an Elderly Parent in Their Home

You might be able to keep the family home and qualify for Medicaid

The average life expectancy in the U.S. is now nearly 79 years. While most hope to remain living independently as long as possible, with a longer lifespan comes an increased likelihood for elder care. Though difficult, planning ahead is the best way to go. For most, however, the potential need for nursing home care poses the threat of wiping out resources you had hoped to pass on to your family.

But you might find solace in a little-known rule called the Caregiver Child Exemption.

The Requirements Under Medicaid

Medicaid is a federally funded health care program that will pay for long-term nursing home care for the elderly and disabled, but only for those who qualify based on limited income and assets, and only where you can no longer care for yourself. In New Jersey in 2017, you may have no more than $2,200 per month income, and assets are capped at $2,000, other than a home if your spouse is still living in it. If you have a home but no spouse, Medicaid requires that you sell the house and use the proceeds to pay for care before you would qualify for coverage. To further complicate matters, there’s a five-year look-back period from the date you apply for benefits during which any gifts you might have made will be counted as available assets for Medicaid purposes. This means that if you transfer your $200,000 house to your child less than five years before you apply for Medicaid, you will be required to cover $200,000 in care costs before you would be eligible.

The Caregiver Child Exemption

The Caregiver Child Exemption is an important, albeit limited, exception to this harsh result. This rule allows you to give your house to your adult child without triggering any gift penalties if they have lived in the home and provided in-home care to you for two years, without which you would have required care in a facility. “It has to be care of a kind that keeps you out of a nursing home,” advises Bridgewater elder law attorney Lawrence Friedman. “If all you’re doing is shopping and doing laundry, that doesn’t cut it.” 

The rule applies exclusively to biological or adopted children, and does not extend to grandchildren, nieces or nephews, or a son- or daughter-in-law. It only applies to your primary residence, and can’t be used as a means to transfer a vacation home.

To help ensure that you would qualify for this exemption, keep records of the care provided, which can include monitoring medications, providing meals, helping with bathing and dressing, and assisting with other activities of daily living that keep your parent safe and allow them to remain at home. Make sure to document any events that might have been dangerous had your parent lived alone, as well as what kinds of additional back-up care were used if you weren’t available. The goal is to show that without this help, they would have had to be in a care facility. In addition, keep records showing that you lived in the home, such as a driver’s license or bills indicating your residence address.

“The big issue is whether the caregiver child can hire a personal care attendant (PCA) or has to be doing the care themselves,” adds Friedman. “The Medicaid offices are taking the position that the caregiver child can’t work and has to provide the care, as opposed to paying someone for it. The law doesn’t say that, but it’s still an open question. We’ll have to see what the courts say.”

If you have questions about the Caregiver Child Exemption, whether you have been providing this type of care for your parent or you’re anticipating a future situation, talk to a knowledgeable elder law attorney who can help you to meet the qualifications. For more information on this area, see our overview of elder law.

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