MW My niece is on Social Security Disability Insurance. Will she lose her health insurance if I buy her a house?

By Quentin Fottrell

'She has not been able to get approved for a mortgage, so I want to help her'

"I need to find a way to help her without affecting her benefits." (Photo subject is a model.)

Dear Quentin,

I have a niece who is on disability.

She has health insurance through Medicare/Medicaid and is in her mid-50s. She owns a house and has $8,000 left on her mortgage. She would like to move into a home that better suits her needs. She lives with her adult son, who is also on disability.

She has not been able to get approved for a mortgage, so I want to help her. I do have cash available to assist, but given her situation, I need to find a way to help her without affecting her benefits and while minimizing any tax-related consequences.

For context, I am 75 and my wife is 77. We have no children and have significant assets. I would be willing to give her what she needs outright and am not looking to get anything back. Can I give her money without it affecting her Medicaid?

The Aunt

Related: I have enough money for both of us. Should we make our kids beneficiaries on my husband's modest $150,000 IRA?

You can email The Moneyist with any financial and ethical questions at qfottrell@marketwatch.com. The Moneyist regrets he cannot reply to questions individually.

After 24 months on SSDI, your niece would likely become eligible for Medicare, rather than Medicaid.

Dear Aunt,

If she's on Medicare, proceed apace. If she's on Medicaid, potholes ahead.

Let's assume she is receiving Medicare as part of her Social Security Disability Insurance (SSDI), which she could be eligible to receive even though she's not yet 65; in that case, her health insurance would be secure. Medicare/SSDI are programs based on her disability and work history (that is, contributions to the Social Security trust fund). After 24 months on SSDI, your niece would likely become eligible for Medicare, even though she is not yet 65.

On the other hand, if your niece is receiving Medicaid and Supplemental Security Income $(SSI)$, it would likely disqualify her from receiving benefits, temporarily at least. To be eligible, she must have no more than $2,000 in countable assets, although the cap varies by state. If she receives SSI or Medicaid, cash gifts or housing support can hurt her benefits. A primary residence is often treated as an exempt asset for Medicaid, subject to state-specific equity rules.

Even though most people must turn 65 before qualifying for Medicare, your niece could be 30, 40 or 50 and still qualify for Medicare once she has been on SSDI for that two-year period. In this instance, her Medicare eligibility would be based on her disability status rather than retirement age. This being the case, she probably receives Medicare Part A (hospital insurance) and Medicare Part B (medical insurance).

A Medicaid asset-protection trust or a third-party special-needs trust could protect your niece's assets if he wished to apply for Medicaid, as long as this is done before the five-year look-back period. These trusts can be complicated and Medicaid can challenge them. They can include stocks and bonds, bank accounts and CDs, and vacation homes and rental properties. With a MAPT, you would give up control of those assets.

Paying for expenses directly

Another way to comply with the Medicaid five-year look-back rule - depending on the laws of your state - is to transfer money to a pooled special-needs trust run by a charitable organization. A pooled special-needs trust is typically managed by a nonprofit that combines assets from multiple people with disabilities into a single fund to maintain eligibility for government benefits like Medicaid and Social Security Insurance.

So what now? You could pay her expenses directly. That might involve paying her closing costs on a new home, or hiring and paying contractors for home improvements on her current property. Don't proceed without consulting an attorney who understands the rules in your state. Typically, third-party payments made directly to providers are not counted as income, although they can count as "in-kind support" for SSI benefits.

If she is on Medicare/SSDI, you could buy her a home with your own funds and either lease it to her and/or allow her to live in it as a life estate. That is, she would be responsible for the maintenance and taxes, but would inherit it upon your death with a step-up in basis (meaning she would pay capital gains on the value on your death if she ever chose to sell it in the future, and not on the original purchase price). However, such generosity could hurt her Medicaid/SSI.

And now a warning for your niece. Under the federal Medicaid Estate Recovery Program (MERP), states are required to seek repayment for certain Medicaid benefits after the beneficiary (your niece, in this case) passes away. Recovery mostly applies to long-term care services like nursing-home or home-based care. Rules, as usual, vary by state. Let's hope that MERP doesn't come calling for a very long time.

As you may well be aware, you can give your niece money outright, if she's receiving Medicare/SSDI rather than Medicaid/SSI. Gifts above the annual exclusion - $19,000 per person per year - must be reported in a separate gift-tax return (IRS Form 709). But you would not have an actual tax liability given that the lifetime gift-tax exemption is $15 million for a single person or $30 million for a couple filing jointly.

Good luck to you and your niece finding her a more suitable place to live.

Related: 'I'm not interested in long-term-care insurance': I'd like to retire at 55. How much will I have to pay for healthcare?

More columns from Quentin Fottrell:

'There is an imbalance of power': My husband has cancer. Why must we wait two hours for a 10-minute CT scan?

'We're all worried the honey pot will run dry': Does the U.S. government borrow from my Social Security to fund federal programs?

'I'm very late to the game': I'm 48, earn $65,000, have $48,000 in debt and no retirement. Am I doomed?

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-Quentin Fottrell

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May 09, 2026 09:19 ET (13:19 GMT)

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