Will Renting From Our Kids After a Home Sale Hurt Medicaid?

Selling your home and paying rent can affect your Medicaid. How much it matters depends mostly on the sale price and what you do with the money.

Does the Sale Money Count Against Me?

Yes, it can, depending on which type of Medicaid you have. Medicaid usually doesn’t count the home you live in, but once you sell it, the cash counts as savings.

If you qualify for Medicaid through disability, age, or a need for long-term care (sometimes called “SSI-related” or “aged, blind, and disabled” Medicaid), your state sets an asset limit. Many states use about $2,000 for one person and $3,000 for a couple. If the sale money puts you over your state’s limit, you could lose coverage.

If you have Medicaid through an income-based category, the rules are different. These programs use “MAGI” (modified adjusted gross income) rules and have no asset limit, so the sale proceeds wouldn’t count as savings. A large taxable profit from the sale could still count as income, though, so check with your state Medicaid office.

Since you’re on disability, it’s worth confirming which Medicaid category you and your wife are in. Your state Medicaid office or your coverage notice can tell you.

Can I Give Some of the Money to My Children?

Generally, yes, but be careful. Giving money or property to your children doesn’t usually affect the health coverage you already have, such as doctor visits, hospital care, and prescriptions. Medicaid’s penalty for gifts applies only to long-term care, such as nursing home care, and only when you apply for that care. SSI has its own rule: If either of you receives SSI, giving away money or property for less than it is worth can stop SSI payments for up to 36 months.

The risk comes later. Medicaid generally looks back five years at gifts when you apply for nursing home or long-term care coverage. Medicaid treats money you give away as a gift, even when it goes to your own children. If it finds a gift, you can face a waiting period during which Medicaid won’t pay for that care. Since you’re on disability, this could matter if either of you needs long-term care in the next five years.

Does the Sale Price Matter?

It does. If you sell your home for less than it's worth, Medicaid can treat the difference as a gift. This is true even if you sell to a stranger. Selling at a fair market price, ideally backed by an appraisal, helps protect you.

Is It Okay to Pay Rent to My Children?

Generally, yes, as long as the rent is fair. Paying too much or too little can affect your coverage depending on the kind of benefits you currently receive:

• For Medicaid: Rent at a normal market price is simply a living expense. Paying much more than the going rate, or paying many months of rent upfront, could be seen as a disguised gift. Having a written lease can help show that the arrangement is a real rental.

• For SSI: If either of you receives SSI and you live in a home owned by your children, paying less than your fair share of the household’s shelter costs can reduce your SSI check. Social Security calls this “in-kind support and maintenance”: when someone else covers part of your housing costs, it counts as unearned income. Paying a fair market rent that covers at least your pro rata share generally avoids this.

If you’re unsure which benefits you receive, check your award letters or ask your local Social Security office before you set the rent.

What Risks Come With Renting From My Children?

You would be tenants in a home your children own, which means you'd have fewer protections than you do now. If your children face money problems, a divorce, or a death in the family, you could be forced to move. It's worth thinking through these possibilities together.

Rules vary by state, so talk to an elder law attorney or your local Medicaid office before you sell.