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Obtaining Medicaid and Preserving Your Family Home
A home is often the primary asset that one wishes to preserve when engaging in long-term care planning. If you have the time to plan in advance, you can evaluate if and to whom you will transfer your homestead (your primary residence). If you decide to transfer, the options are transferring to an irrevocable trust or transferring to an individual or individuals. If you transfer to an “exempt” individual (a spouse, disabled child, child who has resided with you for 2 years or more prior to entering a nursing home, a sibling with equity interest who has resided with you for a least a year), there will be no penalty. If you transfer to someone other than an exempt individual or to an irrevocable trust, Medicaid will impose a period of ineligibility if you apply for nursing home Medicaid within 5 years of the transfer.
That being said, if you transfer the home to an irrevocable trust and you subsequently need nursing home care within the look-back period of 5 years, it may be advisable to leave the transfer as is and privately pay the nursing home for a period of time. For example, if you transferred a home valued at $850,000 and you need a nursing home 4 years after you made the transfer, it would make sense to pay privately for 1 year in the nursing home before applying for Medicaid so that you are past the Medicaid 5 year look-back period. This way the entire home will be preserved.
When you transfer a home to an irrevocable trust, you can continue to receive rental income, if any. If you require nursing home care in the future, you may have to pay the net income to the facility, depending on whether or not you have a spouse who requires that income to reach the minimum monthly maintenance needs allowance (MMMNA) of $3,715.50.
If you cannot plan in advance and you need a nursing home right away, but you have a home in your name, there are a variety of options. If you have a spouse or a disabled child who resides in the home, the home is exempt, irrespective of its value. Hence, once you are deemed eligible for Medicaid, a lien will NOT be placed on the home. That being said, it is usually a good idea to transfer the home because of you own the home jointly with your spouse, for example, and the spouse dies before you, then you will inherit the property, creating Medicaid eligibility issues.
If you require nursing home care immediately, but you are single and nobody else resides in the home, it is important to ascertain the home’s value. If the home is valued at less than $1,033,000, you can sign a letter of intent to return home. Under the Medicaid rules, you will be provided “conditional eligibility”. This means that you will be eligible for Medicaid, but the agency will place a lien on your home. The lien is for all expenses paid by Medicaid on behalf of the recipient. The amount of the lien is based on the Medicaid rate, which is significantly less than the private rate.
Once you are on Medicaid and find that you are unable to return home from the nursing home, you can sell the home. At that point, you will have to pay back Medicaid for the expenses it laid out and be left with the net proceeds of the sale. This will render you ineligible for Medicaid and you will need to engage in a Medicaid eligibility plan, which will likely involve a ‘promissory note’ plan. Such a plan involves transferring some of the proceeds to an irrevocable trust and/or individual and using the remainder of the assets to privately pay during the period of Medicaid ineligibility resulting from the gift/transfer.
If you have a child who is willing to move in with you and assist you, you will have the option of transferring the home to that child with NO penalty after the child has been residing with you for 2 years.
Lastly, the rules for community Medicaid (for home care) differ from the nursing home eligibility rules. Right now, there is no look-back, i.e., no penalty for transfers of assets when applying for community based care. A 30-month look-back is set to start on or about April 1, 2024. If you require community Medicaid and you are single, you will not be eligible if your home’s equity value exceeds $1,033,000. If your spouse resides with you, the home is exempt. If you decide to transfer to a trust or to someone other than spouse, and you can apply prior to the imposition of the look-back, then you will not be penalized for the transfer.
As you can see, there are several different options depending on your marital status, family makeup, living arrangements, etc. It is important to consult with an Elder Law Attorney who can explain your options and help you to make an optimal decision in order to protect your home.
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This article was provided by Ronald Fatoullah, Attorney at Law, Founder of Ronald Fatoullah & Associates – one of New York’s TOP Elder Law & Estate Planning Law Firms. Attorney Fatoullah and his firm are Members of the National ElderCare Matters Alliance and have a Featured Listing on ElderCareMatters.com– America’s National Directory of Elder Care / Senior Care Resources to help families plan for and deal with the issues of Aging.
If you have additional questions about your family’s Elder Care / Senior Care Matters, you can count on ElderCareMatters.com (America’s National Directory of Elder Care / Senior Care Resources) to help you find America’s Top Elder Care / Senior Care Professionals. You can find Local Elder Care / Senior Care Experts by Searching our National Database by City and Service Category. (This Search feature is located on the homepage of ElderCareMatters.com).
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