The home is often the only asset held by seniors when they consult an Attorney for Medicaid planning or asset preservation. If a client requires nursing home placement immediately and the only asset that he or she owns is a home, there are several options.
If a “well” spouse resides in the home after the sick spouse is admitted to the nursing home, the home is not an available asset and therefore ownership will not preclude Medicaid eligibility of the spouse in the nursing home (“institutionalized spouse”). However, if a well spouse does not reside in the home, the equity value of the home is an available asset.
One helpful option is to sign a letter of intent to return home. If an applicant expresses an intent to return home, Medicaid will evaluate who is residing in the home. The home is exempt and a lien will not be placed on it if: 1) the home is occupied by a spouse, minor or certified blind or certified disabled child; 2) the home is occupied by a sibling with equity interest who has resided in the home for at least 1 year prior to the applicant’s admission to a medical facility; 3) the home is occupied by a dependent relative.
If a nursing home resident who intends to go home applies for Medicaid, is otherwise eligible and the equity value of the home does not exceed $878,000, the application will be approved and Medicaid will place a lien on the home. The lien will stay on the home as long as the applicant resides in the nursing home. The Medicaid applicant will be able to qualify for community budgeting from Medicaid so that he or she can retain $879 monthly in order to pay expenses on the home until returning home. If the Medicaid recipient returns to his or her home, the lien will be removed.
If an applicant does not intend to return home, the home is exempt and a lien will not be placed if the home is occupied by a spouse, minor or certified blind or certified
disabled child. If the applicant does not intend to return home and the home is occupied by a sibling with equity interest who lived in the home for at least 1 year prior to the admission, the home is countable, but a lien will not be placed on it. In such a case, clients often transfer the home to the sibling, as the transfer will be deemed an ‘exempt transfer’ and will not affect nursing home Medicaid eligibility.
If the Medicaid recipient sells the home after Medicaid is approved, he or she will have to repay a Medicaid lien (which is typically significantly less than the private rate of a nursing home) and will become ineligible for Medicaid benefits as a result of the sale. However, the individual can engage in Medicaid planning with the net sale proceeds. The individual may gift some of the proceeds and loan a portion of the proceeds, leaving a minimal amount of assets in his or her name, and then reapply for Medicaid. Medicaid will impose a period of ineligibility (“penalty period”) as a result of the gift/transfer of the proceeds. The monthly loan repayments to the applicant will be used to pay the nursing home privately during the penalty period. At the end of the penalty period, Medicaid will be reinstated.
If a client has some countable assets in addition to a home, the client can transfer the property to a Medicaid Irrevocable Asset Protection Trust and he or she can loan the cash to someone and use the loan repayments to pay the nursing home during the period of ineligibility. Transfer of the property to a trust is typically preferred unless the transfer is to an “exempt” individual such as to a disabled child. This planning technique is extremely complex and must be done in a precise way to derive the desired result.
If the client does not submit a letter of intent to return to the home, another option is to sell the home prior to applying for Medicaid benefits. The individual will sell the property and then transfer/gift some of the proceeds and loan some of the proceeds, the repayment of which will be used to pay the nursing home privately during the penalty period resulting from the gift. A Medicaid application must be submitted within 3 months of commencement of the penalty period (the first day of the month following the gift and loan).
Written by Ronald A. Fatoullah, Esq, principal of Ronald Fatoullah & Associates, a New York law firm that concentrates in elder law, estate planning, Medicaid planning, guardianships, estate administration, trusts, wills, and real estate. Attorney Fatoullah is a Member of the National ElderCare Matters Alliance, and he and his firm are Featured Members of ElderCareMatters.com – America’s National Directory of Elder Care / Senior Care Resources for families