We’ve all received the call—aging parents wanting to transfer their homes to their children. Beware: What might seem like a simple real property question can turn into a Medicaid mess. Gifts, including any transfer for less than fair market value, can trigger immediate transfer penalties, including loss of all benefits, request for recoupment of overpayments and nursing home discharge. More and more, real estate attorneys need to be asking clients questions about medical benefits, healthcare needs and long-term care before drafting real property deeds.

Here’s the problem: Mom or Dad might need nursing care and can’t afford the $5,000.00 or more a month it can cost, so they apply for Medicaid to pay the difference. Immediately, the State workers, and well-intentioned providers begin the drum beat: The state is going to take mom’s home. Terrified of losing the home, the client then gives the home away to the kids, a transfer of assets for less than fair market value, which can result in immediate loss of all benefits. Medicaid assesses a transfer penalty for most transfers made in the previous five years without full fair market value compensation. (Medicaid Eligibility Handbook [MEH] Section I-1200) The penalty period for most transfers doesn’t begin to run until the first day of the month when the client is otherwise eligible. (MEH Section I-5200)