Posted inLong Term Care Planning

Will We Lose Our House to The Costs of LTC

Establishing a long-term care plan for seniors is a multifaceted discussion and many times Medicaid is part of that analysis. One of the most common questions I receive when discussing Medicaid is “Will we lose our family home if my spouse (or my parent) receives Medicaid long-term care assistance.” I can tell you that there is a great deal of misunderstanding by the public about which assets are protected and how much of the unprotected assets must be spent.

Any discussion that deals with Medicaid and the assets an applicant owns will generally evolve around three separate components: (1) can the applicant “qualify” for Medicaid assistance; (2) is there an ability to “transfer” the home; and (3) will Medicaid be able to “recover” against the home for the cost of care provided.

Medicaid Qualification

There are specific financial criteria that must be met in order to qualify for Medicaid long term care assistance and every asset owned by the applicant and/or their spouse must be disclosed in the application process, even if it is owned jointly with someone else. The applicant’s assets are categorized as “countable assets” or “excluded assets” and there is a limit on the amount of countable assets an applicant may have in order to qualify for Medicaid long-term care assistance.

Generally, you do not have to sell your home in order to qualify for Medicaid long-term care assistance because the applicant’s home can be excluded as a countable resource with certain limitations. First, to qualify for the exemption, the home must have been the applicant’s primary residence. Also, for a single (non-married) applicant, the home will be excluded from the countable resources if the equity in the home does not exceed $536,000 and the applicant can demonstrate the intent to return to the home if health conditions improve and care is no longer needed. Note that it is the amount of the equity interest, not the value of the home itself. If the equity interest in the home is above the limit, the applicant will need to reduce the equity interest for the home to be excluded. If the applicant is married and the spouse occupies the home, then the home will continue to be exempt while it is actually occupied by the spouse without a limitation on the equity.

Transfer of Home

Transferring your home to your children (or someone else) may lead to a Medicaid penalty period, which would make you ineligible for Medicaid assistance for a period of time. However, there are circumstances in which you can transfer your home and not incur a penalty period. As an example, you can freely transfer your home to:

  • Your spouse
  • A child who is under age 20 or who is blind or disabled
  • A Trust for the sole benefit of a disabled individual under age 65
  • A sibling who has lived in the home during the year preceding the applicant’s institutionalization and who already holds an equity interest in the home
  • A child of the applicant who lived in the house for at least two years prior to the applicant’s institutionalization and who during that period provided care that allowed the applicant to avoid a nursing home stay

However, each situation creates its own unique set of circumstances. It is important to consult an Elder Law Attorney before making any gifts or transfers.

Estate Recovery

Typically, dealing with the home is not an issue associated with qualifying for Medicaid. However, the home can become an issue following the death of the individual because federal law requires all states to establish an estate recovery program to seek recovery from the estate of a deceased individual for the Medicaid benefits they received.

So how does estate recovery work? The Medicaid recipient becomes indebted to the state for the cost of care provided. Upon the Medicaid recipient’s death, the personal representative of the recipient’s estate is required to give the Nebraska Department of Health and Human Services written notice of the recipient’s death and give them an opportunity to file a claim in the estate to recover the debt.

Planning for estate recovery becomes more complicated for married couples where only one spouse is institutionalized because one must consider the possibility that either spouse (the institutionalized/nursing home spouse or the Community Spouse) may survive the other spouse. The main focus of such planning is centered on the assets in which the nursing home spouse had a legal interest at the time of death.

As we age, the need to plan for long-term care will become a reality and Medicaid assistance may be necessary at some point. I encourage you to consult with a qualified Elder Law Attorney to determine whether there is an opportunity to protect your home from estate recovery.