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You know some of us argue about whether it's smart to pay off a mortgage? Well I've suddenly thought, questioningly, whether there are some conditions under which a creditor, or a long-term care provider, or Medicaid/Medicare, or whoever can claim a bunch of your assets except your house.

I'm not much into the whole planning thing yet, but aren't there circumstances like that? Circumstances in which you would be a lot better off having kept a paid off house instead of having the cash or other liquid asset from either selling the house or paying the mortgage as slowly as possible?


It doesn't work the way you seem to think. In the case of Medicaid, which pays for your medical care and long term care if you do not have enough assets, there is a limit on the assets you can keep (no more than $2000 plus a house), so you have to spend down to that limit to get Medicaid to then pick up the tab.

But your house is not safe. It is just that you can keep it while you are alive, but when you die, Medicaid has an automatic lien on your estate, and that includes your house. The house may need to then be sold, and the proceeds go to Medicaid to reimburse them for what they have spent on you. If there is excess, that goes to your heirs. If there is not enough to pay Medicaid, they take what you have, and then write off the rest, which is then paid by us taxpayers.

There are expenses that come before Medicaid, and that includes final expenses and legal fees to settle the estate. If the house has a mortgage, then the bank also gets their share first because the loan was secured by the house.

We just went through this with 2 estates, both of which were underwater to Medicaid, so I do have very recent experience with this.

But the answer to your basic question, which is "is there a way to put all your money into your house to keep it from being taken by Medicaid?", and the answer is no. It is just deferred until you die.
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