Dear Mr. Premack: I am submitting this for my mother. Her questions are: What is the difference between a gift deed and a life estate deed? She is interested in a deed to protect against the 5 year lookback for Medicaid. After she has the appropriate deed can she rent her home and use the money to　rent a different place near　her children? MRP

Your mother’s questions deal with Medicaid, which is a very complex and intricate welfare program. As it relates to the elderly, Medicaid’s main benefit is assistance with long-term care expenses. One program helps nursing home expenses, and another helps with at-home care.

Only those who meet several criteria can qualify for Medicaid assistance. For instance, an unmarried person who has countable assets exceeding $2000 in value does not qualify.

Medicaid allows a person to own non-countable assets not included in the $2000 tally. The value of a person’s homestead is non-countable (up to $500,000). A person who still owns a home but who has less than $2000 in other assets might qualify for Medicaid.

After Medicaid has paid for a beneficiary’s care for months or years and that beneficiary eventually dies, Medicaid may make a claim against the remaining assets for reimbursement of its outlays using the Medicaid Estate Recovery Program (MERP). Often the only remaining asset is the house. Though the house did not interfere with initially qualifying for benefits it may be lost when the homeowner dies.

Your mother asks about deeding the house to protect it from the 5 year lookback. The lookback period is applied when an asset was given away. If the gift was made more than 5 years before applying for Medicaid (outside the lookback period) then it does not cause a disqualification. If the gift is made within the 5 years before applying, Medicaid imposes a disqualification on the giver.

There is no need to give away the home to qualify for Medicaid since it is already classified as non-countable. So your mother does not need to protect her home from the lookback period. Instead, she needs to protect her home against loss under MERP. Is there any way to qualify for Medicaid and yet protect the house from MERP?

One strategy is to give away title to the house outside the lookback period, more than 5 years before applying for Medicaid. This choice may not be best since 1) it is hard to predict that in 5 years a specific person will need nursing home care, and 2) giving away the house causes tax troubles and is a huge risk. If your mother decided to gift the house despite the risks, she would use a gift deed.

Another strategy is to retain title to the house for life while giving the remainder to the children. The minute the owner dies the kid’s remainder blossoms into full ownership. The remainder has value, so giving it away within the 5 year lookback period creates a disqualification. The only way around the disqualification is to eliminate the value of the remainder. This can be done with an enhanced life estate deed allowing cancellation of the remainder at the giver’s discretion.

Your mother goes on to ask whether she can rent out her home after she does the appropriate deed. With a gift deed she cannot because she no longer owns the home. With a life estate deed she can since the house is hers until she dies. But if she rents out the house long-term it stops being her homestead and becomes a countable asset. If she rents it out on a short-term basis (the lease would ideally be month-to-month) then Medicaid still treats it as a non-countable homestead.

Before your mother takes any action, she needs to have a direct consult with an Elder Law attorney familiar with Medicaid law.