How Is a House Divided After a Caregiver Exemption Transfer?

If the house is legally transferred to your sister under the caregiver exemption, your sister becomes the sole owner. Legally speaking, there is no requirement for her to divide the house with you unless a separate legal agreement was made.

How the Caregiver Exemption Works

Normally, if someone applies for Medicaid, they can’t give away assets (like a house) for less than fair market value within five years of application. If they do, they face a penalty period.

The caregiver child exemption is an exception to this rule. It allows a parent to transfer their home to a child without penalty if that child:

• Lived in the home for at least two years immediately before the parent entered a nursing home.
• Provided a level of care that allowed the parent to stay at home rather than move into a facility.

The Legal Transfer

When this exemption is used, the deed is typically signed over to the caregiver child entirely. At that moment, your mother no longer owns the home; your sister does.

Why the House Isn’t Divided Automatically

If the house is transferred before your mother passed away, it is no longer part of your mother’s probate estate.

• If the house were in the estate: Your mother’s will would dictate how it is split (e.g., 50/50).
• Because of the exemption: The house belongs to your sister. It is her private property. Even if your mother’s will says “I leave everything to my children equally,” that only applies to things your mother owned at the time of her death. If she had already given the house to your sister, the will doesn’t touch it.

Potential Ways to Ensure a Fair Split

If your family’s intent is for your sister to save the house from Medicaid but eventually share the value with you, you can’t rely on verbal promises. You generally need one of the following:

• A side agreement or trust. Before the transfer happens, siblings may draft a family care agreement or use a trust. This can stipulate that upon the mother’s death, the caregiver sibling must sell the house or buy out the other siblings. But this would have no effect on assets not owned by the trust, meaning your sister would have to agree to conveying the home to the trust after she received it from your mom. Medicaid generally requires a caregiver transfer to be made to the named caregiver individually, not to a trust in which they are a beneficiary, particularly when that trust has noncaregiver beneficiaries.
• A promissory note. Your sister could sign a legal document promising to pay you a specific amount (your “share”) upon the sale of the house or the passing of your mother.
• Your sister’s own will. Once the house is in your sister’s name, she can choose to leave it to you in her will, but this only helps if she passes away, and she can change her will at any time.

Note: Using this exemption is a complex Medicaid planning strategy. If the paperwork isn’t perfect, the state could deny the exemption and leave your family with a massive bill. It is highly recommended that your family consult an elder law attorney to ensure the transfer is valid and to draft a supplemental agreement if the goal is to share the inheritance.