SIbling Exemption
What Is the Medicaid Sibling Exemption?
The Medicaid Sibling Exemption—sometimes called the Sibling Exception—allows a senior to transfer ownership of their primary home to a brother or sister without triggering a Medicaid penalty, as long as certain requirements are met. This means the home can be given to a sibling without risking denial of Medicaid benefits or loss of existing coverage.
Normally, Medicaid has a 60-month look-back period during which it reviews asset transfers to ensure property wasn’t given away or sold for less than fair market value to meet Medicaid’s strict asset limits. Violations can cause a period of ineligibility. The Sibling Exemption is one of the few exceptions to this rule, allowing a transfer without penalty.
Using the exemption can also protect the property from Medicaid’s Estate Recovery Program (MERP), which attempts to recover costs from a beneficiary’s estate after death. If the home is already transferred to a sibling, Medicaid cannot claim it.
Other transfer exemptions exist, such as transfers to a spouse, a minor child, a blind or disabled child, or via the Caregiver Child Exemption—where an adult child who lived with and cared for the parent for two years before “institutionalization” can receive the home.
How Does the Sibling Exemption Work?
To use the Sibling Exemption, the sibling receiving the home must:
- Have an equity interest in the home (co-ownership)
- Have lived in the home continuously for at least one year before the Medicaid applicant’s “institutionalization”
Equity interest can be shown by being named on the deed, making mortgage or tax payments, or covering home maintenance costs. In some states, like New York, equity is defined by being entitled to a portion of sale proceeds if the home were sold, requiring the sibling’s name on the property title.
“Institutionalization” generally means entering a nursing home or medical facility requiring a Nursing Facility Level of Care, but in many states it also includes receiving Home and Community-Based Services (HCBS) under a Medicaid Waiver, or living in assisted living or adult foster care.
If all requirements are met, the home can be transferred before or after Medicaid approval without affecting eligibility.
Are There Limits on the Value of the Home?
While Medicaid normally enforces a home equity limit for eligibility, there is no value limit for homes transferred under the Sibling Exemption. Home equity is simply the property’s value minus any debts, and the Medicaid applicant’s “equity interest” is the portion they own. There’s also no minimum ownership percentage required for the sibling, though confirming with a Medicaid planning professional is wise.
Do Sibling Exemption Rules Differ by State?
Most states follow the same basic rules, but details can differ. For example, New York requires the sibling to be named on the property title. Because small variations exist, it’s important to confirm the requirements in your state before making the transfer—otherwise, you could unintentionally make a disqualifying transfer.
Can the Sibling Exemption Be Used as a Medicaid Planning Strategy?
Yes. While not the most common planning method, the Sibling Exemption can be a useful tool for siblings who already share a home. In some cases, the Medicaid applicant might transfer a small ownership share (e.g., 1%) to the sibling in advance, purchased at fair market value, to establish co-ownership without violating the look-back rule.
If siblings don’t currently live together, planning ahead is critical—they must live together for at least one full year before the Medicaid applicant’s institutionalization to qualify.
Should You Get Professional Help Before Using the Sibling Exemption?
Absolutely. While the concept seems simple, mistakes can cause serious Medicaid eligibility issues. A Certified Medicaid Planner can confirm your state’s requirements, guide you through documentation, and ensure you don’t make a costly misstep when transferring your home under this exemption.
