Dec262025
Estate Planning Q&A Series

Will transferring the property or selling it affect my relative’s Medicare or any Medicaid benefits they currently receive? – North Carolina

Short Answer

In North Carolina, transferring a house for less than fair market value can trigger a Medicaid “transfer penalty” that can temporarily stop Medicaid from paying for certain long-term care services. Selling the property for fair market value usually does not create a transfer penalty, but the sale proceeds can become countable resources and may cause loss of Medicaid eligibility if they are not handled correctly. Medicare generally is not affected by property transfers or sales because Medicare is not needs-based.

Understanding the Problem

In North Carolina, can a family member transfer a relative’s home to someone else or sell it without disrupting Medicare coverage or Medicaid benefits the relative already receives? The key issue is whether the transaction is treated as a disqualifying gift for Medicaid purposes or creates countable cash/resources that push the relative over Medicaid limits. Timing matters most when Medicaid is paying (or may soon need to pay) for nursing facility care or home- and community-based long-term care services.

Apply the Law

North Carolina Medicaid rules treat certain transfers of assets (including a home) for less than fair market value as disqualifying and can impose a penalty period during which Medicaid will not pay for specific long-term care services. A sale for fair market value is different: it is not a “gift,” but it can convert an exempt or noncountable asset into cash that may count against Medicaid eligibility. Separately, North Carolina runs an estate recovery program that can seek reimbursement from a Medicaid recipient’s estate after death for certain services paid by Medicaid.

Key Requirements

  • Fair market value vs. gift: A transfer for less than fair market value can create an “uncompensated value” and trigger a Medicaid penalty; a bona fide sale at fair market value generally does not.
  • Lookback and penalty period (long-term care Medicaid): If a disqualifying transfer happened on or after the lookback date, Medicaid can impose a period of ineligibility for payment of certain long-term care services.
  • Estate recovery risk: Even when eligibility stays intact during life, North Carolina can pursue repayment after death from property that is part of the recipient’s “estate” as defined by state law for Medicaid estate recovery.

What the Statutes Say

Analysis

Apply the Rule to the Facts: With no specific facts provided, the outcome turns on whether the property is being transferred for less than fair market value (a potential penalty under North Carolina’s transfer rules) or sold at fair market value (usually no transfer penalty, but the cash received can affect eligibility). Medicare coverage generally stays the same either way because Medicare is not based on assets. If Medicaid is paying for long-term care, a gift of property can create a penalty period, and if the property remains in the recipient’s name until death, North Carolina estate recovery can become a separate concern.

Process & Timing

  1. Who files: For Medicaid eligibility questions and reporting changes, the Medicaid recipient (or authorized representative/guardian/agent) typically reports the transaction. Where: The county department of social services (DSS) that handles the recipient’s Medicaid case in North Carolina. What: Written proof of the transaction (deed, closing disclosure/settlement statement, proof of sale price and expenses, bank records showing receipt and location of proceeds). When: Report promptly; Medicaid programs generally require timely reporting of changes in resources or living situation, and delays can create overpayments or eligibility problems.
  2. Eligibility review: DSS reviews whether a transfer was for less than fair market value and whether a penalty applies for long-term care services, and it also evaluates whether sale proceeds are countable resources and whether the recipient remains under applicable resource limits.
  3. Penalty/waiver (if applicable): If DSS proposes a transfer penalty for long-term care Medicaid, DSS must give notice and the recipient may be able to request an undue hardship waiver under state law if the required conditions are met.

Exceptions & Pitfalls

  • Gifting the home (or adding someone to the deed) can be treated as a below-market transfer: Even if the goal is “keeping the home in the family,” Medicaid may treat it as a transfer for less than fair market value depending on how title is changed and what consideration is paid.
  • Selling for fair market value can still create a Medicaid problem: A sale can turn a home into cash. If the cash is accessible to the Medicaid recipient, it may become a countable resource and trigger ineligibility unless a permitted spend-down or other compliant strategy is used.
  • Confusing Medicare with Medicaid: Medicare usually does not change based on assets, but Medicaid (especially long-term care Medicaid) can change quickly based on resources and transfers.
  • Estate recovery is separate from eligibility: Keeping a home and staying eligible during life does not automatically prevent North Carolina from seeking reimbursement after death from assets that fall within the estate recovery definition.
  • Hardship waiver is not automatic: A waiver request typically requires documentation and proof of hardship and efforts to recover the transferred asset or its value.

Conclusion

In North Carolina, transferring real property for less than fair market value can trigger a Medicaid transfer penalty that can stop Medicaid payment for certain long-term care services, while selling for fair market value can still affect eligibility because the proceeds may become countable resources. Medicare usually is not affected by a property transfer or sale. The safest next step is to contact the county DSS office and confirm, in writing, how the planned transaction will be treated before signing a deed or closing.

Talk to a Estate Planning Attorney

If you’re dealing with a planned property transfer or sale while a relative is on Medicaid (or may need long-term care Medicaid soon), our firm has experienced attorneys who can help explain the rules, the risks, and the timing. Call us today at (919) 341-7055.

Disclaimer: This article provides general information about North Carolina law based on the single question stated above. It is not legal advice for your specific situation and does not create an attorney-client relationship. Laws, procedures, and local practice can change and may vary by county. If you have a deadline, act promptly and speak with a licensed North Carolina attorney.

Category: Estate Planning Q&A Series

Author: jpierce

Attorney Jared Pierce is the founder of Pierce Law Group in Raleigh, North Carolina, a firm he established with a dedicated focus on probate administration and estate planning across North Carolina. Born and raised in the Republic of South Africa, Jared moved to Durham with his family in 2001, bringing with him a rich cultural background and a distinctive accent that often serves as a conversation starter.