MassHealth (Medicaid) transfer rules dictate that transfers of assets for less than fair market value within a five year period of application will result in a period of ineligibility. Some MassHealth applicants may want to transfer their principal residence to a loved one prior to entering a long term care facility, however, if not done correctly this can become a disqualifying transfer.
MassHealth Real Estate Transfer Rules
A MassHealth applicant can freely transfer their home to one of the following persons:
1. their spouse;
2. their child who is under age 21, or who is blind or permanently and totally disabled;
3. their sibling who has a legal interest in the home and who was living in the home for at least one year immediately before the date of the applicant’s admission to a long term care facility; or
4. their child who was living in the home for at least two years immediately before the date of the applicant’s admission to a long term care facility and who provided care to the long term care facility resident that permitted him or her to live at home rather than in a nursing facility.
Alternative MassHealth Transfer Options
Another option, if none of the above scenarios apply, would be to have the MassHealth applicant transfer the deed to the property to their loved one while retaining a life estate. The life estate will be valued according to the MassHealth actuarial tables and will result in less of a transfer penalty than if the property were transferred outright. A life estate can be a good way to protect the grantor (i.e. the MassHealth applicant) while allowing them the ability to remain in control of the property during their lifetime. There are also some drawbacks that should be discussed when contemplating using a life estate, such as needing the grantee’s permission to sell or otherwise encumber the property.
Yet another option is to simply transfer the property to an irrevocable income only trust, with the MassHealth applicant and spouse serving as both donor and trustee. Using this option the husband and wife would control the trust assets and be able to live in the property for as long as the live. After the five year look back period has passed the house will be entirely protected from MassHealth liens and could be transferred to their heirs through their will.
Obviously there are a lot of considerations to take into account when considering transferring your property, and a Massachusetts estate planning lawyer should be consulted before making any final decision.