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Updated July 31, 2026. Quick answer: federal law (42 U.S.C. §1396p(c)(2)(A)(iv)) lets a parent transfer the HOME to an adult child with no look-back penalty when two conditions are both met: the child lived in the home for at least two years immediately before the parent entered a facility, and during those years the child provided care that allowed the parent to stay home instead of being institutionalized. It is one of the few clean exits from the transfer-penalty system — and it fails constantly on documentation, not eligibility.
What makes it hold up
The state will ask for proof of BOTH prongs: residency (driver’s license, tax returns, utility bills at the address for the full two years) and care (a physician’s letter describing what care the parent needed and what the child provided — medication management, bathing, meals, supervision — ideally written while the care is happening, not reconstructed later). “Visited often and helped a lot” loses; “lived there and was the reason placement was delayed, per the treating physician” wins. The transfer must be of the home itself, and it must go to the caregiver child — not split among siblings.
What it does and does not solve
Done right, it moves the house with no penalty AND takes it out of the estate before estate recovery can reach it. What it costs: the child takes the parent’s carryover basis (a lifetime gift, not an inheritance — no step-up), so a low-basis house carries a real capital-gains bill when sold. Compare that against the deed-addition mistake and the deed-based routes in TOD states before choosing. If the two-year facts do not fit, do not force them — the penalty formula is unforgiving and states audit these transfers.