Protecting the Family Home after Illness Even When in a Nursing Home
This entry was posted on May 12, 2014
This Blog reviews options for how you can protect your family home after you are already ill and even when you are already in a Nursing Home.
Under the Medicaid law, the family home is a special asset that has important additional protections in the event of a long term illness.
When the Medicaid Applicant applies for Medicaid covered home care, the family home is exempt and is not counted as an asset for eligibility purposes. The applicant can receive Medicaid and continue to live in the family home. However, the home is still at risk of being lost:
- Estate Recovery Risk: When the Medicaid home care recipient dies, the Medicaid Agency is entitled to recover from his/her Probate Estate for reimbursement for expenses Medicaid paid towards the cost of home care. It is important to obtain legal advice on the proper steps to protect the home from estate recovery by making sure the home does not pass through the Probate Estate.
- Future Nursing Home Risk: The family home loses its exempt status if the Medicaid recipient subsequently enters a Nursing home. The family home is then considered an available resource to be spent towards the cost of care, unless one of the exceptions discussed below becomes applicable.
Therefore, having the family home treated as an exempt non-countable asset when applying for Medicaid for home care coverage creates a false sense of security. The home ultimately remains vulnerable to being lost towards the cost of care.
No Transfer Penalty: One option to protect the home in this situation is to transfer it to another person or to an Irrevocable Trust before applying for Medicaid coverage. There is no transfer penalty for Medicaid coverage for home care or community based services. However, if the Medicaid recipient subsequently enters a Nursing Home, the 5 year look back period would apply resulting in a transfer penalty period of ineligibility. Therefore, it is important to review carefully whether transferring the home would be a good option depending on your circumstances.
Nursing Home Care
When a single person enters a Nursing Home, he/she is entitled to keep $14,550. The family home is no longer exempt and must be sold and spent towards the cost of care before he/she would become eligible for Medicaid.
However, there is one important exception where the Medicaid Agency cannot force the sale of the home and that is when the Medicaid applicant signs a statement declaring his/her intent to someday return to his/her home.
When the Medicaid applicant signs an “intent to return home” statement, the Medicaid Agency will not force the sale of the home. The home will not be counted for eligibility purposes, but the Medicaid Agency will place a lien on the home.
If you do not return home, then whenever your home is sold, while you are living or after your death, Medicaid will have the right to be reimbursed from the proceeds of sale for any expenses it paid toward the cost of your care. If any family members paid expenses on the home, they might not be reimbursed.
If you do return home, then the Medicaid Agency must withdraw the lien. On your death, Medicaid would be entitled to be reimbursed for any expenses it paid toward the cost of your care from your estate. Currently, New York law limits Medicaid recovery to your “Probate Estate.” This means that unless the law is changed, if you take steps to avoid your home from being part of your probate estate, then Medicaid would not be entitled to recovery.
Submitting an intent to return home does not protect your home. It is a method to establish Medicaid eligibility without being forced to sell your home.
The advantage of delaying the sale of your home and establishing immediate Medicaid eligibility is that 1.) it protects you from losing your home in the event you become medically able in the future to return home and 2.) the cost of care is normally less expensive at the Medicaid rate than the private pay rate which means that the depletion of the equity in your home is at a lower rate.
Depending on how long you remain in a nursing home and on the cost of care, it is possible that there may be some equity remaining for your heirs after the Medicaid lien is paid off at the time of the sale of the home.
When the community spouse is living in the home, the family home is exempt and is not counted as an asset when determining Medicaid eligibility for the ill spouse who is applying for Medicaid covered home care or nursing home care.
Don’t Keep the Home Owned Jointly Between Spouses
The first mistake families make is to leave the home owned jointly by both spouses. The problem occurs if the community spouse unexpectedly dies first. Now, if the ill spouse is receiving Medicaid coverage at a nursing home, he/she will now become the sole owner of the home. Since there is no longer a community spouse living in the home, the family home loses its exempt status and becomes an available resource. Typically the Medicaid recipient would have his/her Medicaid case terminated and the home would have to be sold and the proceeds spent towards the cost of care and then once the balance is spent, then he/she would have to reapply for Medicaid.
Therefore, when one spouse needs long term care, they should not leave the home jointly owned. Since there is no transfer penalty period of ineligibility between spouses, the ill spouse can transfer his/her one-half ownership of the home to the community spouse.
Community Spouse Needs to Update Estate Planning Documents
Now, if the community spouse dies first, the home would pass according to his/her Last Will and Testament. Since spouses often have Wills leaving everything to each other, it is important that in addition to transferring the home to the community spouse, he/she also sign a new Will disinheriting the ill spouse.
There are still two problems that might occur. First, if the community spouse dies first and disinherits the ill spouse, in New York State, a surviving spouse has the right to object to being disinherited by his/her deceased spouse and demand that a portion of the deceased spouse’s estate be given to the surviving spouse. This is called exercising the “spousal right of election” to receive the “elective share.” Under this law, the surviving spouse is entitled to demand to receive the greater of $50,000 or one-third of the deceased spouse’s net estate. The Medicaid Agency will typically require the ill spouse to exercise his/her right to receive the elective share.
The second problem that might occur is that the community spouse might also someday need long term care in a Nursing Home at which point he/she would be treated as a single person. The home would lose its exempt status because there would no longer be a spouse living in the home. As discussed in the previous newsletter, when a single person enters a Nursing Home, the family home is considered an available asset for eligibility purposes and must be sold and spent towards the cost of care before Medicaid will be approved for coverage. Using an “intent to return home” statement could be used to temporarily protect the home.
False Sense of Security
Therefore, merely having a spouse living in the family home creates a false sense of security. While the home may be exempt for the Community Spouse, it is still at risk of ultimately being lost. The community spouse should consider doing long range asset preservation estate planning for him/herself including establishing an Irrevocable Living Trust.
Child Who is Blind, Disabled or Under Age 21
Under the Medicaid law, if your child is legally blind, disabled, or under age 21, the family home can be transferred to your child without any Medicaid transfer penalty period of ineligibility.
If your child is also receiving Medicaid or other government benefits, he/she may need to transfer the home to a Supplemental Needs Trust in order to maintain eligibility. Your child may also need to review his/her estate planning options to protect the home for other family members.
Child Who is Serving as Your Primary Care Giver
Under the Medicaid law, your home can be transferred to your child if he/she was residing in your family home, using it as his/her primary residence for a period of at least 2 years immediately before the date you became institutionalized, and provided care to you which permitted you to reside at home, rather than in a nursing home.
The Medicaid Applicant has the burden to prove to the Medicaid Agency that (1) the child moved into the family home as his/her permanent residence for the past two years and (2) but for the child’s care, the parent would have had to enter a nursing home during this two year period.
Sibling Who has an Equity Interest in the Home
Under the Medicaid law, your home can be transferred to your sibling if he/she has an equity interest in the home, and has been residing in the home and using it as his/her primary residence for a period of at least one year immediately before the date you became institutionalized.
The Medicaid Agency issued an Administrative Directive in 1989 outlining examples of what would be considered acceptable documentation of an equity interest:
“Equity interest must be documented by submission of: canceled checks or money orders for mortgage payments; a deed reflecting ownership; or other documents verifying expenses for capital improvements. Examples of expenses which would satisfy the requirement of equity interest, assuming there was no information to indicate otherwise, include: structural renovations. (widening of doorways, installation of ramps, etc.) other than cosmetic (painting, landscaping, kitchen/bath remodeling, etc.)”
There are many exceptions to the Medicaid transfer penalty rules. The family home can sometimes be protected for family members.
At the Koldin Law Center, P.C., with offices in Syracuse , New York, we have more than 50 years of experience helping individuals deal with immediate crisis asset preservation options even when you are already in a Nursing Home. Our attorneys are available to discuss your legal rights including your options to protect your family home during a free initial consultation.