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Husband and wife live separately. Husband still lives in house, wife lives in apartment. NJ has courtesy and dower rights. If husband goes into nursing home, will medicaid still say husband owns 1/2 the house because he still lives there even though wife does not? They are still married.

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I'd consult with a Family Law attorney, who also handles Elder Law issues. Perhaps, a law firm that has several attorneys who have expertise to provide you answers and advice.
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I won't even hazard a guess as to Medicaid's response, but I'll just point out some issues to consider if you need legal assistance, and I think you might if there's a possibility the husband may need Medicaid.

Just to make sure I understand, the husband deeded his FULL (?) rights to his wife, but continues to live there. Is he paying rent as a tenant? Wife owns the house but lives separately.

Was this done for a specific legal or tax purpose?

I think there are some questions that arise not only from potential Medicaid determination but from legal rights, i.e., does someone who has deeded his (presumably) entire interest to a spouse somehow acquire ownership rights from continuing to reside in the house? Or would he acquire rights as a tenant? But how would his being married affect any tenancy rights?

I think an attorney needs to review the deed of conveyance as a first step, and the effect of dower and courtesy rights as a second step. And it should be either a family or matrimonial attorney, or a real estate attorney, or both working together (possibly in the same law firm). Then address the potential Medicaid issue.

There are knowledgeable Medicaid posters here, but the issue of ownership and rights in the real property would I think be a challenge for Medicaid itself.
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I think the answer lies in how the property was " deeded" to the wife. Was the title transferred and all filings done? Consult a lawyer; Sunny's idea about a full service firm with specialists in Eldercare, Medicaid, Real Estate and Family Law is an excellent one.
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Oh, I see that Sunny and Barb already answered and addressed the critical issues.
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If deeded over before the five year look back, then it belongs to her no matter who lives in it. Aunt signed her house over to son yrs ago. She lives with him. But I agree, run it buy a lawyer.
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husband deeded house over because of gambling, thought he was going to lose the house. he does not pay rent, but he pays all house expenses and the mortgage payment. wife lives separately as stated.
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