Can a Nursing Home Take Your Home? 4 Ways to Avoid the Worst-Case Scenario

Nursing homes themselves can’t take your home, but if you apply for Medicaid to cover long-term care, the state may attempt to recover costs through the Medicaid Estate Recovery Program (MERP).

Understanding how MERP works and exploring strategies to protect your home can help you avoid this outcome. This guide breaks down what you need to know and actionable steps to safeguard your home.

Table of Contents

What happens to your home if you go into a nursing home?

Let’s imagine you’re moving into a nursing home and can afford to pay for it out of pocket. If this is the case, you can keep your home. You’re free to sell it, rent it out, or even let a family member use it. It’s yours.

On the other hand, not everyone is in that financial position. If you’re applying for Medicaid, your primary residence might be exempt from Medicaid’s asset limit, especially if you meet certain conditions. For example, if you only have a low amount of equity in the home or if your spouse lives in the home, it may be an exempt asset.

The same may be true if a disabled child or a caretaker child (an adult child who provided care while living in the home) currently lives there.

Long story short: Going into a nursing home doesn’t necessarily mean surrendering your house itself. However, you’ll want to explore strategies to avoid losing your home when moving to a nursing home, especially if you’re considering Medicaid.

Can a nursing home take your house?

There’s no getting around it: nursing homes are expensive. According to GenWorth’s Cost of Care survey, the median nursing home is $9,733 per month—or about $320 per day.

Those numbers are staggering, even if you have an otherwise rock-solid financial situation. It’s no wonder so many people find themselves applying to Medicaid for relief.

While nursing homes won’t take your house directly, moving into a nursing home paid for by Medicaid introduces the possibility that MERP estate recovery eventually comes for the home.

Have a look at these scenarios to better understand when you may and may not be protected:

Scenario	Can Medicaid take your home?	Details
You’re living in the home alone	Yes, potentially	Your home is protected while you live there, but if you have to move out, MERP may recover the home after your death.
You’re married, and one spouse continues to live in the home	No	Medicaid won’t recover the home if a spouse or any qualifying dependent still lives there.
You move to a nursing home, and grown children still live at home	No	Adult children can qualify to create an exemption for your home.
You pass away, and grown children live at home	Yes	Trusts can potentially protect your home, but these must be set up in advance to avoid any Medicaid penalties.

How far back can a nursing home take your house?

There is a “look-back” period for the government, covering about five years, in which the government “looks back” at your financial situation to see whether you qualify for Medicaid funding.

A house transfer, or any other possibility on your financial transactions that may violate Medicaid rules, could mean Medicaid considers you able to pay for your own nursing home, putting you on the hook for your own care.

As for the house itself, Medicaid can only file a claim on your home after your death. This period may go even longer if you have a surviving spouse, child under 21, or a disabled adult child.

Can assisted living take your house?

Medicaid can potentially cover assisted living care—separate from nursing homes. However, anyone paying out of pocket won’t need to expose their house to the risk of being part of the payment.

How to avoid a nursing home taking your home

There’s no getting around how scary the prospect of losing your home can be. For many, their home is the chief financial legacy they’ll leave behind.

If one spouse remains in the home, this is not an issue of losing the home. If you’re going into a long-term care (LTC) facility, you no longer need your home anyway.

LTC planning should be done years in advance to improve the success rate of not losing your home. Effective strategies include using LTC insurance, life insurance with LTC benefits, or IRAs or personal savings.
Michael Menninger, CFP®

But these strategies can mitigate the chances MERP comes for the house—or has any recourse to do so.

Strategy	Best for
Long-term care insurance	Those who anticipate significant healthcare costs in retirement but want to preserve their home and other assets
Use personal savings	People with stable income, lower current debt obligations, and a long time horizon to grow their savings
Retirement accounts	Individuals already contributing to retirement accounts who want to ensure they can meet future healthcare costs while safeguarding their home
Transfer home ownership	Those with trusted family members to transfer ownership to and who are working closely with an estate attorney to navigate the legal and tax implications

Long-term care insurance. Long-term care insurance might cover nursing home costs. And it could put a dent in your need to rely on Medicaid. Ideally, you can use these insurance benefits to cover the cost of the nursing home, which means you don’t rely on Medicaid at all—at which point, there’s no need for MERP to come and recoup its costs. Long-term care insurance is typically a realistic option if you have spare income now and anticipate needing long-term care in retirement age.
Extensive personal savings. This one will take much time, planning, and discipline. But if you’re reading this in a part of your life where you may be decades away from the nursing home, your personal savings plan can have a major impact on whether you’re eventually able to handle nursing home costs out of pocket. If you can avoid Medicaid’s asset recovery strategies, your home remains yours.
Use your retirement accounts. A Roth IRA or 401(k) plan can give you tax protections so investments grow tax-free or tax-deferred. Once you reach retirement age, typically the time when you need a nursing home, you can start taking distributions that might help you protect your home.
Transferring ownership of your home. Transferring ownership of your home well before the look-back period could give you more flexibility to qualify for Medicaid without the house being part of the MERP. However, you’ll want to consult with an estate attorney to ensure you’re making the right decision.

Transferring home ownership to children is usually a bad idea. This does not escape the five-year look-back and passes the cost basis on to children, resulting in a future tax liability to them when they sell it. If anything, sell the home to your children at fair market value and gift the proceeds, possibly to an irrevocable trust.

As for using retirement accounts, the Roth IRA is the last account to use because of its tax-free nature. Use the traditional IRA first because the LTC costs are likely tax-deductible and offset most of the IRA distributions for tax purposes.
Michael Menninger, CFP®

How to keep your home and age in place

Ideally, you can keep your home without relying on nursing homes at all. This might not seem like an option if your home care needs become too much and you start to need full-time assistance. However, staying healthy isn’t the only plan that can potentially keep you in your home.

Home sale-leaseback

One option is a sell-and-stay home sale-leaseback.

With a sale-leaseback, you sell your home (securing the money you need for your in-home care) and then become a renter in that same home. You won’t need to move or give up the memories you made in that home. As a side benefit, you’ll no longer have to worry about property taxes.

Truehold is our highest-rated home-sale leaseback provider. At Truehold, sale-leasebacks offer a simple proposition: cashing out without moving out. And for many people who find themselves facing a tough financial situation, it can be the exact right move—without a “move.”

Reverse mortgage

A reverse mortgage is similar to a sale-leaseback, but it’s essentially a loan. With a traditional mortgage, the borrower takes out money and makes monthly payments to the lender. A reverse mortgage pays the homeowner through monthly payments, though lump sums and lines of credit are also available.

The borrower is taking out a loan against the equity in their home. This loan usually doesn’t need to be repaid until they sell the home or pass away, allowing flexibility in their living arrangements.

Check out our reviews of the best reverse mortgage companies.

Home equity loan

If you own a substantial portion of your home, that counts as “equity” against which you can borrow money.

The home equity loan comes out as a lump sum you repay in fixed monthly installments. Because the loan is secured with home equity (which you’re borrowing against), these installments can be quite reasonable.

Thanks to the additional security of your home equity, people with excellent credit scores can qualify for interest rates of around 7% to 8% (in December 2024). That’s much lower than current credit card interest rates, which average around 25% as of the time of this writing.

Check out the best home equity loans.

HELOC

Similar to a home equity loan, a home equity line of credit (HELOC) is money you borrow against the equity you own in your home. However, this line of credit doesn’t function like a lump sum loan. Instead, it’s credit you can borrow should you need it.

This makes a HELOC feel more like a credit card than a mortgage. Since you’re working on credit, you’re free to remain flexible and not borrow this credit. Or you can take out the credit and use it to pay for live-in care, for example.

Read our reviews of the best HELOC lenders.