Protecting the Family Home for Spouse When you are In a Nursing Home
August 6, 2014
This edition of the Koldin Report E-Newsletter continues a series reviewing options for how you can protect your family home after you are already ill and even when you are already in a Nursing Home. In the previous issues, we reviewed the advantages and disadvantages of (1) transferring the family home to children while reserving a life estate, or (2) transferring the family home to an Irrevocable Trust. We also reviewed the rules for protecting the family home for a single person who needs Medicaid covered home care and the use of the “intent to return home” statement for a single person who has entered a Nursing Home. All past issues of our E-newsletters are saved on our website in here. This newsletter will review how the family home can be protected for the community spouse. 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. The next edition of the Koldin E-Newsletter will continue this series on protecting the family home by reviewing when the family home can be transferred to the Medicaid applicant’s children or siblings. At the Koldin Law Center, P.C. with offices in Syracuse , New York, we have over 40 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.