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Medicaid/MassHealth Planning-Protecting the Personal Residence

Without proper planning, many people do not realize the financial cost that a nursing home or long-term care placement can have upon the assets of an individual needing such care until it is too late to protect the assets. In most cases, for an individual to even qualify for MassHealth (the Massachusetts component of Medicaid), that individual will need to deplete his assets down to about $2,000. That means that an individual could be forced to liquidate and spend away any savings, investments, bank accounts, and real properties until he is finally able to qualify for MassHealth benefits. An individual without proper planning could end up paying all of his hard-earned assets and savings over to the nursing home before becoming eligible for MassHealth. Many people know about MassHealth’s five year look back rule (treating MOST transfers of assets for less than fair market value to be a fraudulent conveyance within the last five years prior to the MassHealth application) but fail to take the steps to protect assets.

This blog will touch briefly on some potentially available options to protect the personal residence of someone seeking MassHealth benefits. Contacting an attorney at Lake Shore Legal will allow for a more in-depth consultation concerning which option(s) is the best based upon the specific facts and time constraints facing you, as well as the tax considerations that should be addressed.

A lot of people that I speak with believe that since the primary residence can be “exempt” asset on the MassHealth application that it is protected from all future MassHealth claims. This is incorrect. While the primary residence can be considered an “exempt” asset in certain circumstances, the residence can still be subject to creditors during probate. Under the current Massachusetts law, when an individual who has been receiving medical assistance under MassHealth dies, MassHealth can recover its expenses through the probate estate of that individual. Therefore, if the residence passes through probate, and MassHealth files as a creditor of the estate, the Estate may be forced to sell the residence to cover the expenses of its creditors including MassHealth.

So how can the personal residence be protected? Well here are just a few of the more common methods:


One spouse can transfer his interest in the home to the other spouse without any adverse impact on MassHealth eligibility. Such a transfer would give the receiving spouse a carry over basis from the transferor spouse. Further, MassHealth is precluded from asserting a right of recovery against the estate of a deceased spouse if the residence passed outside of probate. This provision means that if property is currently titled as tenants by the entirety or as joint tenants with the right of survivorship, then the property would pass by operation of law upon the death of the first spouse and would not be a probate asset. Since the asset passes outside of probate, MassHealth’s claim at probate would fail to reach the residence.


As stated above, a transfer for less than fair market value, unless subject to an exception, may result in the imposition of a period of disqualification from MassHealth for certain long-term services, including nursing home services, for up to sixty-months or longer, depending on the value of the transferred asset. The two big child transfer exceptions to the MassHealth penalty are:

  1. Transfer to a child who is blind, disabled, or a minor; or,

  2. Transfer to a care proving child who has been living in the home for at least two years and who has provided care needed for the applicant to avoid nursing home placement.

Gift to a Child

An outright gift of the property to the child does not fall under one of the exceptions. This gift would be subject to the sixty-month look back period. The child would also receive a carry over basis in the property from the transferring parent. Further, unless the child uses the property as their principal residence for a certain period of time a potentially available capital gains tax exclusion may not be useable at the time of a future sale. There would be no Massachusetts gift tax on such a transfer (Massachusetts does not have a gift tax), but the transfer would likely necessity the filing of a Federal gift tax return by the transferor parent (please note, there likely would be no actual gift tax owed unless the federal $11.2 million exclusion has already been utilized). Since the parent has given up his rights within the residence at the time of the gift, the property is not a probate asset.

Transfer to a Child while Retaining a Life Estate

One of the simplest and most utilized means of protecting the residence is to have the transferor parent sign a deed transferring the residence to a family member while reserving a life estate in the property. Ultimately, this means that the transferor is allowed to retain an interest in the property until death. The property cannot be sold without the permission of the transferor because of the retained life estate. While such a transfer is subject to the sixty-month look back period, the transferor parent retains enough control over the property, that upon death the transferee family member likely would receive a stepped-up basis in the residence rather than a carry over basis. This transfer is considered a partial gift to the family member at the time the deed is signed and filed. The value of any such gift is based upon IRS tables compiled based upon the age and life expectancy of the transferor. Additionally, the property passes outside of probate and thus is not subject to any creditors of the estate, including MassHealth.

Transfer to a Care Providing Child

To qualify for this exception, and consequently not be subject to the sixty-month look back period, the child must:

  1. Have resided in the parent’s home for a period of at least two years immediately preceding the date of the nursing home or long-term care placement (and such period of residency must be verifiable); and,

  2. The child must have provided care that enabled the parent to reside within the residence rather than in an institution.

Both of the above requirements must be verifiable at the time of filing the MassHealth application. Once again, the two years residency requirement concerns the residency of the child within the parent’s home. Proof can be provided by providing the child’s income tax return with the address upon it, a license, or a voter registration card.

The level of care requirement can be a little more complicated. Common practice is to provide MassHealth with a letter or affidavit from a medical authority or caregiver that described the condition of the parent, the care provided by the child, and that had such care not been provided that the parent would have been unable to remain within the residence. MassHealth has recently been challenging such letters and affidavits as insufficient to qualify under this exception. A care providing child should now request that any such affidavit or letter include in detail why and how the parent’s condition required a level of care meeting specific “Score 3 criteria” and why the parent could not have been cared for in an assisted living residence during the two-year period.

Since this would be a transfer for less than fair market value, the child would receive a carry over basis in the property. However, since the child has been utilizing the property as a principal residence it will be easier for this child to qualify for available capital gains tax exclusion upon any sale of the residence in the future.


Other common means of protecting the residence are transfers into specific trusts. Normally the trust must be irrevocable to offer protection from a potential MassHealth lien. A trust transfer is subject to the sixty-month look back period. There are numerous trust transfers available, and such an explanation would be outside the scope of this blog. However, an attorney at Lake Shore Legal can explain these options to you.


Proper planning is an important part of elder care and estate planning. Individuals who are fearful that they may end up in a nursing home or long-term care placement in the future should begin thinking and planning now. Likewise, planning is advisable and should be considered by most individuals due to the fact medical issues can arise quickly and unexpectedly. While there are available ways to protect the personal residence of an individual, other assets, such as life time savings and retirement accounts, can be completely drained prior to MassHealth eligibility. Most transfers of assets and certain transfers of the personal residence need to clear the sixty-month look back period before MassHealth will consider the transfer to be non-fraudulent and non-countable when determining MassHealth eligibility.

Contact Lake Shore Legal today and allow our experienced attorneys to discuss the options available to you. We can assist you with planning methods to protect the assets you have worked so hard to acquire over your lifetime. Contact us today.; (508) 943-7800.

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