Managing Partner
In North Carolina, limited methods exist to pay for skilled care in a nursing home. Assisted living facilities are governed by an entirely separate set of rules and payment programs and are not discussed in this article.
Three methods are available for nursing home payment in North Carolina: Medicare (for a very limited time and purpose); Private Pay; or Medicaid. In order to qualify for Medicare payment for nursing home care, an individual must enter a nursing home directly from a hospital in order to receive rehabilitation services. For the first 30 days, Medicare will pay the bill in full IF the individual continues to meet the rehab improvement guidelines. After the first 30 days, Medicare may pay for some portion of the bill, up to 100 days. If, at any time, the individual ceases to meet the rehab guidelines, the Medicare payments cease.
After Medicare payments cease, the nursing home resident must either pay privately or qualify for Medicaid. In order to qualify for Medicaid, the individual must meet an income test and an asset test. Certain assets (the homesite, a vehicle, and certain other assets which are converted to an “exempt” classification) are excluded from countability. If a spouse resides in the home, there are additional liquid assets allocated to the spouse. Medicaid will also review five preceding years of bank statements and IRS records, as well as real estate records, to determine if the applicant transferred assets to someone other than a spouse during that time frame. Transfers without compensation result in Medicaid disqualification. Even though certain assets (such as the homesite) can be retained while an individual receives Medicaid, if the asset is not structured properly, it is subjected to Medicaid Estate Recovery at the death of the Medicaid recipient.
Real estate ownership can be structured in certain ways (even during the five-year lookback period) to avoid Medicaid Estate Recovery and to convert certain countable assets to exempt assets. The two main avenues used by elder law attorneys to protect assets where an individual will need nursing home care within five years are (1) joint tenancy deeds with right of survivorship and (2) ladybird deeds.
In the first ownership structure, an individual purchases a 1% interest in a piece of property, while the original owner or owners retain 99%. The deed is structured with right of survivorship so that, upon the death of the Medicaid recipient, the other owner receives the property immediately. Countable real estate becomes non-countable and, because North Carolina law exempts this type of asset from creditor recovery, the asset is protected upon death. No transfer sanction is caused by the sale of the 1% interest because the purchaser paid for the interest with his or her own funds.
With a Ladybird Deed, an individual transfers a future (“remainder”) interest to someone and retains lifetime rights (a “life estate”), along with the right to reverse the gift and take back the remainder interest or to sell it to someone else. Historically, these deeds did not carry a transfer sanction because the property owner retained the right to reverse the transfer. In addition, like a life estate deed, the property avoided Medicaid Estate Recovery.
Ladybird Deeds were created in another state, and they have never been legally tested in North Carolina. They also have the potential to create real estate title issues. In September 2025, the updates to the North Carolina Medicaid Manual effectively ended the use of Ladybird Deeds to make real estate exempt. The new Manual section provides that the individual has not transferred anything of value and that the entire asset remains countable. Other provisions of North Carolina law have previously made the ability of the Ladybird Deed to evade Medicaid Estate Recovery suspect as well. As a result, anyone with a Ladybird Deed should have it reviewed to determine if changes to the Medicaid plan should be made in light of the changes to the North Carolina Medicaid Manual.
