A capital gain is the difference between what you sell your house for and the actual cost basis. This is the amount originally paid for the home and the cost of any improvements you made to it.
For example: You bought your home for $200,000 and put $30,000 into it in upgrades. Then you sold it for $300,000. The capital gain is $300,000 minus $230,000, or $70,000. That is the amount upon which you are taxed.
When you sell your home, you can exclude from your taxes up to $250,000 for individuals, or $500,000 for joint filers. If your home has significantly appreciated, you may owe capital gains tax. Also, you must be aware of some requirements: you must have owned and occupied your home as your primary residence for at least 2 of the last 5 years, and you can’t use this exclusion more than once every two years. There are also some additional exclusions for specific circumstances. Be sure to check with your estate-planning attorney to fully utilize your capital gains exclusion.
Actually, couples can often have $100,000+ and still qualify for Medicaid by utilizing a REQUEST FOR A HEARING for asset allocation. Federal and State Laws have been enacted to protect people from becoming impoverished if their spouse enters a nursing home, however there are still income and asset restrictions. A knowledgeable elder law attorney knows the exceptions built into the legislation, and can help you prepare to preserve assets while still qualifying for Medicaid.
There is a common misconception that parents in a nursing home cannot make financial gifts to their children. This is inaccurate. There is indeed a 3-5 year look-back period at the time that one applies for Medicaid benefits, depending upon whether or not a trust is involved. However, financial gifts during the look-back period may cause a delay in the applicant’s eligibility, not necessarily negate it. 
The new bankruptcy law signed into effect on April 20, 2005 by President Bush may affect the equity in a debtor’s home. Substantial concern has been raised with regard to the ability of a debtor to protect his or her residence. Under present Massachusetts law, debtors can elect to use the Massachusetts Homestead Exemption to protect $500,000 of equity from creditors, either in a bankruptcy or non-bankruptcy situation. Under the present law, and effective immediately from the date the law was signed by President Bush, that figure has been reduced to a maximum of $125,000 in many situations. The ability to increase the $125,000 amount will be dependent upon the length of time that the debtor has owned the home, how long he or she has lived within the state and the source of the funds used to purchase the residence. This is a major change from the former law protecting residential property from loss when faced with financial difficulties.