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What is the 'caretaker child' exemption in Medicaid planning?

As many adults in New Jersey can attest, caring for an aging parent is a great act of love, but it is also a significant undertaking. Sometimes, an adult child even needs to set their career aside in order to care for their parent's daily needs. Parents understand how hard caregiving can be, and they may want to find some way to compensate their adult child for the care they selflessly give. One option they may have is to transfer ownership of their home to their child. Not only can this compensate the child for the sacrifices made, but it is also a way to preserve Medicaid eligibility through what is referred to as the "caretaker child" exemption.

People can take advantage of this exemption if the proper steps are followed. First of all, the adult child must have resided with their parent for a minimum of 24 months in the house their parent owns. Also, the care given to the parent by the adult child must be done with the purpose of letting the parent remain in their house, instead of residing in a nursing home. The caretaker needs to be a child (either biological or adopted) of the parent, not another relation. Also, the parent's home must be their primary place of residency.

Transferring one's home to a caretaking child can also be good for Medicaid planning. Often, when a person's health requires them to reside in a nursing home, they pay for the nursing home through Medicaid. Medicaid eligibility is dependent on a person's income. That being said, a person, in general, cannot have given away assets within the last five years in order to become Medicaid eligible. If they do so, they may incur a penalty. However, through the "caretaker child" exemption, a parent can give the child their house if all requirements are met, without being penalized and while still maintaining Medicaid eligibility.

In the end, this post can only provide a brief outline of the "caretaker child" exemption. Those who wish to take advantage of such an exemption may want to discuss their situation with an attorney, who can advise them on how to proceed.

Source: WilmingtonBiz Insights, "The Caretaker Child: How Aging Parents Can Compensate Adult Children For Care At Home," Kara Gansmann, Oct. 16, 2017

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