why is it a bad idea for my mom to give me her house before she has to go into a nursing home?

My dad is currently in a nursing home and his care is being funded by long term care insurance. However, we are concerned that if he outlives his insurance policy then he will have to apply for Medicaid wich will essentially make my mom is destitute. I know there is a 5 year lookback and I have read several sources that say its a bad idea for my mom to give away assets right now, however I have not really been able to find much concrete information on why it’s a bad idea or what the actual repercussions are likely to be.

Asked on June 8, 2017 under Estate Planning, Arkansas


SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 3 years ago | Contributor

If she sells it to you for market value--even the low-end of what would be considered fair market value--there won't be a problem: that is a fair, "arms length" transaction where she essentially simply replaced the home with its more-or-less equal value of money, which money is available to pay for her care.
But the law does not let people going on Medicaid hide assets from  the government; they have to use their own assets for the care, and can't simply let the taxpayer foot their bill while preserving their assets for themselves, their family, or their heirs. This includes transferring assets for less than market value (such as giving them away) to family members, since that is taken to be an effort to hide the asset from the government and keep it from Medicaid, preserving it in the family. Therefore, if such a below-market transfer was done during the look back period, the government can undo the transaction and take the home; in some cases, if it's concluded that you willfully tried to help defraud Medicaid, you could potentially face other liability, too.

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