My mom is on food stamps and Medicaid if she sells her house will she lose her benefits?

dear harry,
My mom has a home (estimated value $300,000) and no money in savings. She uses many government-funded benefits (food stamps, energy assistance, Medicaid) to supplement what her Social Security doesn’t cover on a monthly basis. My brother and I are trying to determine if selling her home and moving her to a smaller, less expensive home would help, but we realize that once the house is sold, she may lose some or all of these benefits because then there will be money in the bank. Is the right thing to do is move her home into our name (but then we’d have to pay capital gains once it sells) or into a trust before we sell so it’s out of her name? She will not be able to survive without these government benefits, regardless of the increase in her savings.

Dear Reader,
Your mother is subject to the misery of public benefits in our country. Many programs are only available to people who keep their savings below $2,000, a threshold that hasn’t changed since 1984.

There are many factors your mother needs to consider when deciding whether to sell her home or transfer it or a portion of the proceeds from its sale to you and your brother or to a trust.

First, you’re right. If the house is transferred to you and your brother and you then sell it, you will have to pay taxes on any capital gains. If your mother keeps the house and sells it herself, she can exclude the first $250,000 of gain from taxation. So it probably doesn’t make sense to transfer the house to you and your brother if the plan is to sell it.

Second, there are other possible drawbacks to such a transfer. The house or the proceeds of its sale will be subject to a claim if you or your brother are sued and possibly if you start divorce proceedings. In addition, your mother will lose some autonomy as she will depend on you for her home and possible access to her money.

Third, such a transfer may make your mother ineligible for benefits for a period of time. To make things complicated, each program has its own rules, and sometimes the rules differ depending on the circumstances. For example, some state Medicaid programs do not impose a transfer penalty while the beneficiary lives in the community, but do if they move to a nursing home.

Fourth, a trust can make sense, but a typical trust used to protect homes must be irrevocable and must prohibit distribution to the person creating it. So if your mother transfers her home to a trust and then trades it in for a cheaper house, she won’t have access to the cash that will be generated. This is an argument for transferring the house or surplus directly to you and your brother to keep for your mother, despite the disadvantages described above.

Finally, if your mother is disabled, she may be eligible for one of two “safe harbor” trusts that allow her to shelter assets and still benefit from them. For one of these trusts, she must be under the age of 65. The other, called a (d)(4)(C) or “pooled disability trust,” she may be eligible for after age 65, but that depends on the state’s options. As you can see, these issues are very complex, and the best plan depends on a combination of your mother’s situation, the specific benefits she receives, and how the various laws apply in your state.

To determine the best approach, it makes sense to consult with a local elder law attorney.

Harry S. Margolis practices elder law, estates and special needs planning at Margolis Bloom & D’Agostino in Boston and Wellesley, MA. and is the founder of He is the author of The Baby Boomer’s Guide to Trusts: Your One-Stop Estate Planning Tool and answers consumer questions about estate planning issues at

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