Can Medicaid Claim Home Sale Proceeds After a Spouse Dies?

Dealing with the complexities of Medicaid and estate recovery while grieving is a lot to handle.

While your father has certain protections as a surviving spouse, moving the money into a simple savings account could create significant legal and financial headaches.

Here is a breakdown of how Medicaid estate recovery and property rights work in this specific situation.

1. Can he sell the home and put the money in savings?

The risk: your father’s future Medicaid eligibility. While your father can sell the home, doing so changes the nature of the asset.

• The state is prevented by federal law from authorizing estate recovery while your father is living, regardless of whether his assets are in a home or cash.
• Once he sells it and puts $175,000 in a savings account, that money becomes a countable asset if he seeks Medicaid eligibility. The savings account value would be over the asset limit (usually $2,000) and he would have to spend down before getting Medicaid.
• Simply adding your name to his savings account does not protect the money from Medicaid eligibility criteria nor estate recovery. Medicaid will either view that money as 100 percent his or sanction him for gifting the money to you, thereby making him ineligible for Medicaid for a period of time.

2. Would Medicaid try to recover savings after his death?

Yes. Indiana’s Medicaid Estate Recovery Program (MERP) is designed to recoup the costs paid for your mother’s care after both spouses have passed away.

• Because your father is still living, Medicaid cannot collect yet.
• Once your father passes away, the state can file a claim against his estate to recover what they spent on your mother.
• Indiana is an expanded estate recovery state, meaning that even if the asset passes to you through survivorship, it is still attachable for Medicaid recovery.

3. Is it better to keep the house and add your name?

There is a danger in “simple” deed changes. Removing your mother’s name is fine as she has passed away, but adding yours might seem like a shortcut to avoid probate, but it carries heavy risks:

• If you are added to the deed now, you lose the “stepped-up basis.” When you eventually sell the house, you could owe significantly more in capital gains tax than if you inherited it after his death.
• Adding your name to the deed is considered a “gift” or transfer. If your father needs Medicaid within the next five years, this transfer could disqualify him from receiving benefits.

Indiana Home Options: Sale vs. Inheritance Comparison

What Should You Do Next?

Because Indiana has specific rules regarding total asset protection and spousal impoverishment, you should not move any money or change any deeds yet.