Is a Home in a Trust Considered an Asset by Medicaid?

Yes, Medicaid usually sees assets in a trust, but how it counts them depends entirely on the type of trust you have.

Medicare vs. Medicaid: The Critical Difference

It is a common misunderstanding, but Medicare does not pay for long-term assisted living or custodial care (help with dressing, bathing, or memory care). Medicare is for medical treatments and short-term rehab.

Medicaid is the program that pays for long-term care, but it is “means-tested,” meaning your mother must have very low assets (often $2,000 or less, depending on the state) to qualify.

Is the House a Countable Asset?

Whether the home in the trust counts against her Medicaid eligibility depends on the type of trust:

Revocable Trust (Living Trust)

• The home counts as an asset but may generally be exempt if she intends to return home. It should be noted that many states require Medicaid applicants to remove a primary residence from a living trust and convey to their own name once eligibility has been determined.
• If you sell the house, the cash proceeds will belong to the trust and will likely make her ineligible for Medicaid until that money is “spent down” on her care.

Irrevocable Trust (Medicaid Asset Protection Trust)

• The house might be protected.
• If the trust was set up as irrevocable and the house was moved into it at least five years ago (the lookback period), the house may not be counted as an asset, subject to the terms of the trust. Irrevocable trusts are presumed countable assets but can be treated as noncountable if certain conditions are met.
• However, if you sell the house now, the cash stays in the trust. While this protects the money from being counted by Medicaid, it also means you generally cannot use that money to pay for her care without potentially “breaking” the trust’s protection or triggering tax penalties.

Selling the Home: The Spend-Down Strategy

If you are selling the home because you can no longer afford her care, you are essentially entering a spend-down phase.

• Selling a revocable trust home. You sell the house, and the proceeds go into the trust account. You then use that money to pay the assisted living facility privately. Once her total funds drop below the state’s limit (e.g., $2,000), you then apply for Medicaid.
• The primary residence exception. If a home is owned personally (not in a trust) and the owner intends to return to it, or if certain family members live there, Medicaid sometimes ignores the home’s value. However, once you sell it, that exempt house turns into countable cash.

Important Next Step

Because Medicaid rules vary significantly by state (especially regarding assisted living waivers), consult an elder law attorney before signing a listing agreement for the house.

A mistake in how the sale is handled or how the money is titled could lead to a penalty period where Medicaid refuses to pay for her care for several months or years.