Protecting the Family Home When you are Already Ill or In a Nursing Home
July 1, 2014
This edition of the Koldin Report E-Newsletter begins 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 issue, we reviewed Estate Planning options to protect the family home when you are in reasonably good health, including transferring the home to another person and transferring the home to an Irrevocable Trust. All prior newsletters are saved on our website can be found by clicking here. This newsletter will review situations where the Medicaid applicant is a single individual (never married, spouse has already died, divorced, or spouse is 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. HOME CARE 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. The next issue of the Koldin Report E-Newsletter will review how the home can be protected for the community spouse of the Medicaid applicant. 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.