Medicaid’s Three-Month Replacement Home Rule in Washington

What is the three-month replacement home rule for Medicaid in Washington? When a Washington Medicaid client sells an excluded home, the proceeds stay excluded if used to buy another home by the end of the third month after receipt. Otherwise sale cash generally becomes countable the next month.

If you sell the family home to pay for care, the clock on the cash can start running when the money arrives, and the rule text leaves several practical questions open. This article reads the rule as written, shows where it stops, and describes how the closing side of a sell-and-buy plan generally works in King County, Snohomish County and the rest of Washington.

A note before you read on. This article is general information, not legal, tax, or financial advice. I am a real estate broker, not an attorney, CPA, or lender, and no attorney has reviewed it. Where the sources used here do not answer a question, the article says so, and that question is one for DSHS or an attorney who handles Medicaid planning, and escrow timing questions go to the title company. The wider picture is in the guide on selling a home when a spouse needs care. This piece stays on one window. For a shorter overview, see the page on selling a home when a spouse needs long-term care.

What the rule says

Two Washington Health Care Authority rules work together. DSHS offices generally handle the eligibility side, which is why the questions below go to DSHS.

The first is WAC 182-512-0300. Its subsection 3 says cash from selling an excluded resource “becomes a countable resource” starting the month after the conversion. It then lists exceptions: using the cash to replace the resource, reinvesting it in another excluded resource, or spending it. For a house, it points to the longer home-sale period set by the next rule.

The second is WAC 182-512-0350. Subsection 2 says proceeds from selling the home are excluded as a resource “if the client uses the proceeds to purchase another home by the end of the third month” after receiving the proceeds from the sale.

These are the general resource rules for SSI-related medical programs. The long-term care chapter points back to them: WAC 182-513-1350, subsection 4(a)(v), lists WAC 182-512-0350 among the sections used to determine countable resources. In the parts read for this article, WAC 182-513-1350 does not address sale proceeds or a replacement-home period.

A timeline, using a hypothetical

Here is a hypothetical, not a real client. A couple sells a Shoreline home and plans to buy a smaller one. The made-up sale closes early in Month 1 and, for this example only, the funds are received that same day. One possible way to count, and not a confirmed rule: if the month of receipt is not counted, the third month after receipt would end on the last day of Month 4.

When	What happens	What the rule text says
Month 1	Sale closes, funds received	The three-month clock runs from receiving the proceeds
Start of Month 2	First moment of the month	Cash from a sale becomes countable the month after, unless an exception applies
Months 2 and 3	Search, offer, financing, inspection	The home-sale period is the exception, if the proceeds buy another home
Last day of Month 4 (one reading)	End of the third month after receipt	The purchase is to happen “by the end of the third month”
Month 5 and later	Unspent proceeds	The sources used here do not say how a late purchase is treated

The table is one possible reading of the timeline. The rule text read here does not define how the months are counted. Whether the month of receipt counts as month zero is a question for DSHS.

How long the first half takes depends on the home being sold. A free seller report and consultation shows what comparable homes sold for and how long it can take to reach a closing.

What “received” means, and what the rule does not say

The rule uses the word “receiving” and not “closing,” “recording,” or “settlement.” That choice matters, because closing and the arrival of money can happen on the same day or on different days, depending on how the escrow company handles the funds. The rule text does not say which one starts the clock. The federal SSI rule, 20 CFR 416.1212, counts “3 months of the date of receipt of the proceeds,” which is worded differently from the Washington text. The sources used here do not reconcile the two, so the question of when the clock starts is one for DSHS.

Here are the other gaps, each of them a question for DSHS or a lawyer:

• What the replacement home must be. The Washington text says “another home.” The federal rule says the new home must be “similarly excluded.” Whether Washington reads its words the same way is not stated.
• Who owns it. The sources used here do not say whose name must be on the new title, or whether a spouse can hold it.
• Leftover cash. If the new home costs less than the proceeds, nothing in the Washington text addresses the difference. The federal rule has separate language about proceeds “to the extent” they are intended to be used, and the Washington text has no matching passage.
• Part of the price. The text says the client “uses the proceeds to purchase.” It does not say whether a purchase partly paid with a mortgage qualifies, or what share must come from the sale.
• Extensions. No extension language appears in the subsections read. The sources used here do not say whether DSHS ever grants more time.

Subsections 8 to 10 of WAC 182-512-0350 use different language for payments on a home sale contract, where principal not reinvested within three months of the month of receipt becomes a liquid resource as of the date of receipt. That is a different setup than a cash closing, and it is one more reason to ask how a particular sale will be treated.

How the two closings line up

This part is about how closings generally work. It is not a promise about any one transaction, and the rule does not set any of it.

• Funds timing. In a typical Washington closing, the title or escrow company collects the buyer’s money, records the deed, and then pays the seller according to the seller’s instructions. Whether the money is wired out, held, or sent toward another purchase is arranged in those instructions. Whether holding money at the escrow company counts as “receiving” it is not answered in the sources used here.
• Same-day closings. Some sellers close the sale and the purchase on the same day with the same title company. Others close weeks apart. A same-day plan needs both buyers, both lenders and the seller’s own purchase to line up.
• Financing and contingencies. A replacement purchase with a mortgage usually has a financing contingency and an appraisal step, and lenders set their own timelines. A loan that takes longer than expected can push back the purchase closing date. The rule text read here does not say whether the window moves with it.
• Rent-back and delayed possession. A seller can sell and stay in the home for a short agreed period after closing, often under a written rent-back. Sellers are generally paid at closing even when they stay on under a rent-back, though the written terms of each deal control. Whether a delayed possession date affects when money counts as received is a question for DSHS.
• What the settlement statement shows. The seller’s statement lists the sale price, payoffs, fees and the cash due to the seller. The purchase statement shows the price, the loan and the cash needed from the buyer. Together they record the dates and amounts of the sale and the purchase.

Closing documents are records, not a ruling. Whether DSHS wants them, and how it would read the timing, are questions to put to DSHS before the sale. For the purchase side, the guide to buying a home in Seattle covers financing and offer timing.

What else the sale can touch

A sale changes more than the resource count. The five-year review of transfers is covered in the article on the Medicaid look-back period when selling a house in Washington. What happens to a replacement home later is a separate topic: the article on estate recovery and the family home takes it up.

Questions to bring to DSHS or a lawyer

• When does the three-month period start: at closing, when funds are disbursed, or when we can access them?
• How are the months counted, and what is the last day in our case?
• Must the new home meet the same conditions as the old one?
• Whose name can be on the new title?
• What happens to cash left over after the purchase?
• Is there any way to ask for more time if a closing is delayed?
• Is money held in escrow treated as received?

For the title company, ask how and when your sale funds will be paid out, and whether they can be held or sent toward a purchase.

Frequently Asked Questions

How long do you have to buy a replacement home after selling in Washington Medicaid?

WAC 182-512-0350 says the purchase should happen by the end of the third month after receiving the sale proceeds. One possible reading, not a confirmed rule, is that this ends on the last day of the fourth month when the month of receipt is not counted. If the purchase misses the window, WAC 182-512-0300 makes sale cash countable the following month unless an exception applies. Ask DSHS about counting and extensions.

Does the replacement home have to be a primary residence?

The Washington text read here says “another home” and does not use the words “primary residence” or add other conditions. The federal SSI rule says the new home must be “similarly excluded.” The sources used here do not say how DSHS applies the Washington wording, so a lawyer or DSHS can answer it before a purchase contract is signed.

What if the new home costs less than the sale proceeds?

The Washington text does not address leftover cash. The federal rule has separate language about proceeds “to the extent” they are intended to be used, but the part read here does not spell out the remainder. How DSHS treats the difference is not stated in the sources used here, so it is a question for DSHS or a lawyer.

Does a delayed closing or rent-back change the deadline?

Not that the rule text says. The rule refers to receiving the proceeds and buying a home, and it does not mention possession dates or rent-back periods. A rent-back changes when the seller moves, and in general practice not when funds are paid, though that comes from usual closing practice and not from the rule. Whether a delay can extend the window is a question for DSHS.

Talk through the closing timeline

If a sale and a smaller purchase are both on the table in King County or Snohomish County, call me before you list. I can lay out how the two closings can be sequenced, what the lender and title company will need, and where the dates could slip, so you can bring a clear timeline to DSHS or your lawyer.

I am Emily Cressey with HomePro Associates at Keller Williams Greater Seattle. You can reach me at 206-245-8813, or start with the downsizing guide. More at HomeProAssociates.com.

This article is general information, not legal, tax, or financial advice. Emily Cressey is a real estate broker, not an attorney, CPA, or lender. Rules change and every situation is different, so consult a qualified professional before acting on anything here.