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Under the laws of most states, when you transfer your house to a child or anyone else, you enter into a Medicaid penalty period, barring your eligibility for Medicaid for a period of time. A way to avoid the penalty period is for the Medicaid applicant to transfer the house to a child considered to be his or her “caretaker.”

A caretaker child is defined as a child who lived in the applicant’s house for at least two years before the applicant moved to a nursing home and who cared for the applicant during that time in such a way that he or she could avoid moving to a nursing home. The rule applies only to a child, not to another support person. What you need to do to prove the child has lived with the parent and cared for the parent in the manner required varies from state to state. For that reason, it’s important to contact an attorney before making any sort of transfer.

You may transfer your home to the following entities and avoid the penalty period:

  • A child under age 21 who is disabled or blind.
  • Your spouse.
  • A trust for the benefit of a disabled person under age 65. Under certain circumstances, it’s OK if the applicant is the beneficiary of the trust.
  • A sibling who, during the prior year, had lived in the house and has an equity interest in it.

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