The safest way to protect assets from Medicaid nursing home costs is to transfer them to other family members five years before the owner needs nursing home care, reports AARP. Spouses or dependents residing in a home protect it from lien recoveries, states Medicare.gov. Spousal impoverishment rules protect other assets.
Before nursing home residents qualify for Medicaid to help cover their costs, they must spend down their own assets, according to Nolo. Typically they use their own assets to pay for nursing home care until the assets are depleted. Although they can spend as much money as they want on anything, they must receive fair market value for their purchases. This prevents them from protecting their assets by giving them as gifts to family members. If Medicaid discovers applicants have transferred assets for less than market value within five years of their application, the applicants must wait out a penalty period before Medicaid eligibility, even if they have exhausted their own resources.
Under Medicaid estate recovery, a Medicaid program can recover the amount the state spent on Medicaid from a Medicaid recipient's estate after death, reports Nolo. However, the state cannot recover on a lien against a home if a spouse, brother or sister with equity interest or a blind, disabled or minor child resides there, according to Medicare.gov. Additionally, spousal impoverishment rules protect not only the home but also the spouse's income, including some of the nursing home resident's income if the spouse needs it, and half the marital assets.