For many families, the house is more than their parent’s largest financial asset.
It may be the home where Mom and Dad lived for decades, where the children grew up, and where the family still gathers.
So, when a parent enters a nursing home and Medicaid becomes a possibility, one of the first questions is often:
“Are we going to lose the house?”
The answer is not automatically yes.
But the rules involving Medicaid and the family home are complicated, and what the family does with the house can have significant consequences.
Owning a Home Does Not Automatically Prevent Medicaid Eligibility
A common misconception is that a nursing home resident must sell his or her home before Medicaid can provide assistance.
Medicaid law treats a principal residence differently from an ordinary bank or investment account in certain circumstances. Whether the home affects eligibility can depend upon the applicant’s circumstances, who resides in the home, how the property is owned, and other factors.
If a spouse remains at home, additional protections may apply.
Accordingly, families should not assume that admission to a nursing home automatically requires a sale of the family residence.
Should We Transfer the House to the Children?
Not without first obtaining advice.
A transfer of property for less than fair market value during Medicaid’s applicable lookback period can result in a penalty period.
New York generally applies a 60-month, or five-year, lookback to nursing home Medicaid. However, there are important exceptions to the transfer rules.
Under appropriate circumstances, transfers of a home to a spouse, certain children, a qualifying sibling, or a qualifying caregiver child may receive special treatment under Medicaid law.
Whether an exception applies is a legal question that should be addressed before the deed is signed.
The Caregiver Child Exception Can Be Particularly Important
One exception deserves special attention.
Under applicable Medicaid rules, an adult child who resided in the parent’s home for at least two years immediately before the parent’s institutionalization and provided care that permitted the parent to remain at home rather than enter a nursing facility may, under appropriate circumstances, qualify for an exempt transfer of the home.
The requirements matter.
Simply saying, “My daughter took care of me,” does not necessarily establish the exception. The residency, timing, and nature of the care should be carefully evaluated and documented.
Eligibility Is Not the Only Issue
Even when the home does not prevent current Medicaid eligibility, the analysis should not end there.
Families should also consider what happens to the property later.
Medicaid law contains estate recovery provisions through which the government may seek recovery of certain Medicaid benefits after the recipient’s death, subject to important limitations, protections, and exceptions.
That makes the manner in which property is owned, transferred, or retained an important part of long-term Medicaid and estate planning.
There may also be income-tax, capital-gains, gift-tax, estate-tax, creditor-protection, and family considerations associated with transferring a home.
A Medicaid strategy should not solve one problem while unnecessarily creating another.
What If the House Was Put Into a Trust Years Ago?
Then the trust needs to be reviewed.
Whether the house is protected depends upon the type of trust, its terms, when the property was transferred, what rights the parent retained, and other circumstances.
The fact that a document is called an “irrevocable trust” does not, by itself, answer every Medicaid question.
Likewise, a revocable living trust generally serves very different estate-planning purposes from an irrevocable Medicaid asset protection trust.
Do Not Rush to Sell, Transfer, or Change the Deed
When a parent enters a nursing home, families are often under tremendous pressure to make decisions quickly.
The nursing home wants to know how it will be paid. Bills are accumulating. Family members may be receiving conflicting advice from friends, facility personnel, financial professionals, and the Internet.
The family home is too valuable to make decisions based upon assumptions.
At the Law Offices of Jeffrey A. Asher, PC, we help families evaluate how a home fits into Medicaid eligibility and asset-protection planning, as well as the family’s broader estate plan.
Before selling the house, transferring the deed, adding a child as an owner, or assuming that Medicaid will “take the house,” determine what the rules actually mean for your family.
In Medicaid planning, what happens to the house often depends upon what you do before the application is filed.