Transfers That Are Allowed (Exempt Transfers)

The look-back catches gifts and below-value sales made in the five years before someone applies for Long-Term Care Medicaid. But federal law lists certain transfers that are exempt: they do not cause a penalty, no matter when they happen. This guide explains each one in plain language.

The exemptions come from the federal Medicaid statute (Section 1917(c) of the Social Security Act, 42 U.S.C. 1396p(c)). Every state must allow them, though states differ in the paperwork they require.

Figures change periodically. Double-check current amounts before relying on them.

Quick reference

Transfer to…	What can be transferred	Main conditions
A spouse	Any asset, including the home	None, though the assets still count when figuring eligibility
A child who is blind or permanently disabled	Any asset, including the home	Disability is shown under Social Security rules
A trust for a disabled person under 65	Any asset	Trust must be for that person’s sole benefit
A child under 21	The home	Child is under 21 at the time of transfer
A sibling	The home	Sibling has an equity interest and lived there at least 1 year before the applicant entered care
A “caregiver child”	The home	Child lived there at least 2 years before the applicant entered care and provided care that delayed the move

Transfers between spouses

A married person can transfer any amount to their spouse without a penalty. This includes the home.

However, this does not mean the couple’s assets are protected. When one spouse applies for Long-Term Care Medicaid, the state counts the assets of both spouses, no matter whose name they are in. Moving assets from one spouse to the other does not change the total. What protects the spouse at home is the Community Spouse Resource Allowance (CSRA). See CSRA and Spousal impoverishment rules.

Spousal transfers matter more after eligibility is approved. At that point, the applicant usually moves assets that the spouse at home is allowed to keep into the spouse’s name alone.

A transfer to a spouse is also exempt if the spouse then transfers the asset to someone else for the spouse’s sole benefit. But if the spouse at home gives the money away to a third person, that later gift can be reviewed.

A parent can transfer any asset, including the home, to a child of any age who is blind or permanently and totally disabled, without a penalty. The child’s disability is usually shown by a Social Security disability decision or medical records that meet the Social Security definition.

The transfer can also go into a trust set up solely for the benefit of that child.

Trusts for a disabled person under 65

Assets can be transferred without penalty into a trust set up solely for the benefit of a person under 65 who is disabled. This can include the applicant’s own disabled relative, or anyone else under 65 with a disability. Rules on what “sole benefit” means are strict, and the trust must be drafted to meet them. See Special and supplemental needs trusts.

Home exemptions

The home gets extra protection. In addition to transfers to a spouse or a disabled child, the home can be transferred without penalty to:

A child under 21

If the applicant has a son or daughter under age 21, the home can be transferred to that child.

A sibling with an equity interest

The home can be transferred to the applicant’s brother or sister if the sibling:

already has an ownership (equity) interest in the home; and
lived in the home for at least one year right before the applicant entered a nursing home or other institution.

See Sibling exemption.

A caregiver child

The home can be transferred to a son or daughter (of any age) who:

lived in the home for at least two years right before the parent entered a nursing home or other institution; and
provided care during that time that allowed the parent to stay at home rather than go into care sooner.

States usually ask for proof, such as a doctor’s statement that the parent needed a nursing-home level of care during the two years, and records that the child lived there (mail, a driver’s license, tax returns). See Child caregiver exemption.

Other transfers that do not cause a penalty

Federal law also says no penalty applies when:

The applicant intended to receive fair value. If the person meant to sell at fair value, or for other valuable consideration, the transfer may be accepted.
The transfer was made only for a reason other than qualifying for Medicaid. The state sets a high bar and decides based on the evidence. See Gifts and the look-back.
All of the assets have been returned. See Curing a transfer.
A penalty would cause undue hardship. Every state must have a process for this. Undue hardship generally means the penalty would deprive the person of medical care, or of food, clothing, shelter or other necessities of life.

Transfers that are not exempt (even though people often think they are)

Gifts within the IRS gift tax annual exclusion ($19,000 per recipient in 2026). See Gifts and the look-back.
Gifts to a child who is not disabled, even if the child is struggling financially.
Charitable donations, in most states.
Paying family members for care without a written agreement made at the time.
Putting a home in a revocable living trust does not create a penalty, but it also does not protect the home, because the person still controls it. Putting assets into an irrevocable trust generally is a transfer that is reviewed under the look-back.

Spending that is not a transfer at all

Spending money on yourself at fair value is not a gift. Paying your own bills, repairing your home, buying a car you use, buying a prepaid funeral plan within your state’s limits, and paying off your own debts are all allowed. These can be part of normal spend-down.

Proving an exemption

The caseworker will usually ask for documents. Depending on the exemption, these may include:

marriage certificate (spousal transfers);
Social Security disability award letter or medical records (disabled child);
birth certificate (child under 21);
deed showing the sibling’s ownership interest, and proof of residence (sibling exemption);
proof of the child’s residence, plus a doctor’s statement about the parent’s care needs during the two years (caregiver child);
a copy of the trust document (trusts).

If the state does not accept an exemption, it must send a written notice and you can ask for a fair hearing. A Certified Medicaid Planner (CMP) can help gather the proof each exemption needs. Any deed or trust itself must be prepared by an attorney.

Exempt transfers and the home: a closer look

The home is often worth more than everything else a family owns, so the home exemptions come up often. A few practical points:

The exemption covers the transfer, not just the home’s value. If the home is given to a caregiver child who qualifies, the whole transfer is exempt, whatever the home is worth.
Timing matters for siblings and caregiver children. The one-year (sibling) and two-year (caregiver child) periods are counted back from the date the parent entered a nursing home or other institution, not from the date of the application.
Living there means living there. States look for proof that the child or sibling actually lived in the home: a driver’s license, voter registration, tax returns, mail and bank statements at that address.
The care must be real. For the caregiver child exemption, states usually want evidence that the parent needed help with daily activities during the two years and that the child provided it. A doctor’s letter is often key.

Exempt transfers and estate recovery

When a home is transferred under one of these exemptions, it is no longer the parent’s property. That generally means it is not part of the parent’s estate for estate recovery after death. Estate recovery is a separate set of rules, explained in Estate recovery.

A worked example

Linda, 82, lives in her home in Ohio. Her son David moved in with her three years ago when she started needing help with bathing, dressing and meals. Her doctor confirms that without David’s help, she would have needed a nursing home at least two years ago. Linda now moves into a nursing home.

If Linda transfers the home to David, the transfer can qualify as an exempt transfer to a caregiver child. There is no penalty, as long as the state accepts the proof that David lived there and provided the care for at least two years before Linda entered the nursing home.

If David had moved in only a year ago, the caregiver child exemption would not apply, and a transfer of the home to him would be reviewed like any other gift.

Last updated for 2026. General information only, not legal or financial advice. Medicaid Answers is a free educational resource published by Medicaid Answers Foundation.