Deeding a Home to Family (Quitclaim Deeds)

Many families consider “putting the house in the kids’ names” to protect it from Medicaid. It is often done with a quitclaim deed, a simple, inexpensive form that transfers whatever ownership interest the owner has. It looks easy, but for Long-Term Care Medicaid it is a transfer of assets that can cause a long penalty, and it brings tax, legal and family risks. This guide explains what happens when a home is deeded to family, when it is safe and what alternatives exist.

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

What a quitclaim deed is

A quitclaim deed transfers the owner’s interest in property to someone else without any promises about the title. It is commonly used between family members because it is quick and cheap. Other kinds of deeds, such as a warranty deed, also transfer ownership. For Medicaid, the type of deed does not matter. What matters is that ownership was transferred, to whom, when and for how much.

Why deeding the home can be a problem

The look-back penalty

A home given to a child for less than fair market value within the 60-month look-back is a transfer. Unless an exemption applies, the value of the home (or the share transferred) is divided by the state’s penalty divisor to set the number of months of ineligibility.

Example: A parent deeds a home worth $300,000 to a son for no payment. Two years later, the parent needs nursing home care and applies for Medicaid. The state’s penalty divisor is $10,000 a month (an example figure). The penalty is $300,000 / $10,000 = 30 months. And the penalty starts only when the parent is otherwise eligible: in care, with assets under the limit and an application filed.

Partial transfers

Adding a child to the deed as a joint owner is also a transfer, of the share given. Adding one child as a joint tenant is usually treated as a gift of half the value, depending on state law and how title is held.

Loss of the home exemption

While a parent owns and lives in the home (or intends to return), it is usually exempt for Medicaid eligibility, within the equity limit. Deeding it away gives up that exemption in exchange for a penalty. In many cases, keeping the home is better for eligibility.

When transferring the home is exempt

Federal law allows a home to be transferred without penalty to:

the applicant’s spouse;
the applicant’s child under 21;
the applicant’s child who is blind or disabled, of any age;
the applicant’s sibling who has an equity interest in the home and lived there for at least one year immediately before the applicant entered an institution;
the applicant’s son or daughter who lived in the home for at least two years immediately before the applicant entered an institution and provided care that let the parent stay home rather than in an institution (the caregiver child).

See Exempt transfers, The child caregiver exemption and The sibling exemption.

Other risks of deeding the home to children

Even when the Medicaid result is acceptable, giving the home away has other consequences:

Capital gains tax. A child who receives a home as a gift takes the parent’s tax basis. If the child sells it, they may owe capital gains tax on decades of appreciation. If the child inherits the home at the parent’s death instead, the basis is usually “stepped up” to the value at death, often eliminating that tax.
Loss of tax benefits. The parent may lose property tax exemptions for seniors or homesteads.
The child’s creditors. The home becomes the child’s asset, reachable by the child’s creditors, bankruptcy or divorce.
The parent’s security. The parent no longer owns the home. If the child dies, sells or has a falling out, the parent may lose their place to live.
Other children. Giving the home to one child can cause family conflict.
Gift tax reporting. A gift above the annual exclusion requires a gift tax return, though tax is rarely owed.

Alternatives to an outright deed

Depending on the state and the family’s goals, alternatives may include:

Keeping the home and relying on the home exemption, with planning for estate recovery.
A Lady Bird deed (enhanced life estate deed) in states that recognize it. The parent keeps full control during life, and the home passes at death outside probate, which may avoid estate recovery in states that recover only from the probate estate. See Lady Bird deeds.
A transfer-on-death deed in states that allow it. Whether it avoids estate recovery depends on the state’s definition of the estate.
A traditional life estate deed. The parent keeps the right to live there for life, and the children receive the remainder. Creating it is a transfer of the remainder value, but if done more than five years before applying, it may protect the home.
An irrevocable trust, set up well in advance of the look-back, can hold the home while the parent lives there.
Exempt transfers to a caregiver child, sibling, disabled child or spouse.

Each option depends heavily on state law. A Certified Medicaid Planner (CMP), working with a local real estate attorney, can compare them.

Undoing a deed

If a home was deeded within the look-back and a penalty would result, it may be possible to cure the transfer by deeding the home back to the parent. Many states eliminate the penalty when the full asset is returned. But the home then becomes the parent’s asset again, possibly exempt or possibly countable, and subject to estate recovery. See Curing a transfer.

A worked example

Frank, 79, is a widower in good health. He wants to make sure his house goes to his daughter, Amy. He considers three options:

Quitclaim the house to Amy now. If Frank needs a nursing home in the next five years, he faces a long penalty. Amy would take Frank’s low tax basis and could owe capital gains tax if she sells.
Keep the house and leave it to Amy in his will. The house stays exempt while he lives there or intends to return, within the equity limit. But it would go through probate, and the state may seek estate recovery from it.
A Lady Bird deed (Frank’s state recognizes them). Frank keeps control and can sell or mortgage. At death, the house passes to Amy outside probate with a stepped-up basis. In his state, which recovers only from the probate estate, the house may avoid estate recovery.

After talking with a CMP and an attorney, Frank chooses the Lady Bird deed.

Common questions

Is a quitclaim deed to my children ever a good idea? Sometimes, as part of a plan made well before care is needed, or when an exemption applies. Rarely as a last-minute step.

What if I keep living in the house after deeding it? The transfer still counts. Living there does not undo the gift.

What if my child pays me something? Only the difference between fair market value and the price paid is a gift. A token payment does not help much.

Does the five years start when the deed is signed or recorded? States generally look at when the transfer became effective, often the recording date. Record promptly and keep copies.

Can I deed the house to my child and keep a life estate? That is a life estate deed, a different arrangement. See the alternatives above.

Questions to ask before signing any deed

Will this transfer be inside the 60-month look-back if care is needed soon?
Does an exemption apply (spouse, child under 21, disabled child, sibling, caregiver child)?
What happens to the tax basis, and who will pay capital gains tax if the home is sold?
Will property tax exemptions be lost?
What protects the parent’s right to live there?
How will other children be treated?
Does the state recover from the probate estate only, or from a broader estate?

Recording and documenting

If a deed is signed, it should be properly recorded with the county. Keep a certified copy, the date of recording, and any appraisal of the home’s value at that time. If a penalty is calculated later, the value at the date of transfer matters, and an appraisal made at the time is better evidence than one made years later.

The bottom line

A quitclaim deed is easy to sign and hard to undo. For most older homeowners, keeping the home, or using a tool that keeps control during life, protects more than giving the home away. Get advice from a Certified Medicaid Planner (CMP) and a local attorney before signing anything.

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