When The Home Is A Non
Generally, Medicaid deems the primary residence a non-countable asset as long as the following conditions are met:
1. The Medicaid applicantâs home equity interest limit is $636,000 or less.
- Equity is the fair market value of the home less any debts secured by the home . As an example, if the Medicaid-applicantâs house is worth $700,000, but they had an outstanding mortgage of $200,000, then the Medicaid-applicantâs home-equity value is $500,000, well below the $636,000 threshold.
- However, if the home equity value is determined to be $636,001 , then the entire home is deemed a countable asset.
- What if the house has too much equity and is a countable asset? In that situation, if the goal remains to keep the house, you still don’t have to sell the house in order to become eligible for Florida long term care Medicaid. Instead, we will talk about taking out a small mortgage on the house. In essence this is how we draw equity out of the house to bring it back under the Florida Medicaid’s equity limits.
But, this home-equity rule does not apply if:
2. The Medicaid applicantâs spouse is living in the home OR
3. The Medicaid applicantâs child is living in the home OR
4. The Medicaid applicant has a disabled child or blind child, of any age, living in the home.
The Home: Medicaid Rules
Noncountable asset. The home of the applicant is subject to very special rules established in both state and federal Medicaid law. As a general rule, a home is exempt if all of the following conditions are met:
- It is occupied by the applicant and/or the applicant’s spouse.
- The total equity value is less than $543,000 , and
- Title must usually be held in the name of the applicant and/or the applicant’s spouse.
Transfer rules. However, in most cases, the house cannot be gifted to someone without penalty . But there are exceptions to this rule. Under federal law, when title to the applicant’s home is transferred to another, this will trigger a period of ineligibility for Medicaid coverage of long-term care unless the transfer is made to one of the following individuals:
- the spouse of the applicant
- a child of the applicant who is under age 21
- a child of the applicant who is blind or permanently and totally disabled
- the sibling of the applicant who has an equity interest in the home and who has been residing in the home for a period of at least one year immediately before the date the applicant becomes institutionalized, or
- a son or daughter of the applicant who has been residing in the home for at least two years immediately before the date the applicant becomes institutionalized, and who provided the applicant with care, which permitted the applicant to reside at home rather than in an institution or facility.
Real Estate Transactions In Elder Law : Medicaid Basic Rules
by Linda Ershow-Levenberg, Certified Elder Law Attorney June 2015 updated August, 2020
your life’s most valuable assets
We Can Do Your Medicaid Application. Our Firm has extensive experience in assembling, evaluating, preparing, presenting and defending Medicaid applications for our clients.
Medicaid Law and nursing home care
A person can apply for Medicaid to pay for nursing home care or care in the home when the countable, available resources have been reduced to $2,000 plus an allowance for the community spouse which is called theCSRAor Community Spouse Resource Allowance. The reader needs to understand the fundamental concept that a transfer of any interest in property for less than fair market consideration, if made within the five years prior to applying for Medicaid, will trigger a disqualification period known as atransfer penaltyunless the property was the primary residence and it was transferred to one of a limited category of transferees. The result of this disqualification is that Medicaid will not pay for the care for a period of time, regardless of poverty or medical necessity.
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The Tax Downside Of Transferring Property To Your Kids
When your children inherit property from you after your death, they receive a “stepped up” tax basis, which benefits them when it comes time to sell the house. The step up in basis means that their basis in the house is its current value. Why is this important? Because they will pay capital gains on the difference between the selling price of the house and the tax basis .
If you transfer the house to your kids before death, they do not receive a step up in basis instead, their basis is whatever you paid for the house.
If you transfer the house to your kids before death, they do not receive a step up in basis instead, their basis is whatever you paid for the house. Let’s say you bought your house in 1980 for $50,000. You give it to your children in 2017. If they sell it in 2025, for $300,000, they will pay capital gains tax on the difference, or $250,000.
To compare, imagine that you do not transfer the house, but that the children inherit it from you in 2020, when it’s worth $275,000. They sell it five years later, for $300,000. They will pay capital gains tax only on the $25,000 increase in value since they inherited it.
Medicaid Wont Pay For Assisted Living
Medicaid is a bit funny when it comes to paying for long-term care. For some reason, they have decided that they will only kick in as long as you have no more than $2,000 worth of assets.
Assuming you have some decent equity in the home, selling the home will most likely bring a homeowner above the allowed-asset limit.
However, your home is only considered an asset if you sell it or no longer live in it. So, for example, if you live in a home, its possible for medicaid to kick in and pay for long-term care options, like in-home care, as long as your countable assets are less than $2,000.
All of this means that if you sell a home, you will likely be required to use the home sale proceeds to pay for long-term care before medicaid will pitch in.
Its a fine balance between reducing overall care costs while having subsidized payments from medicaid. While you may get medicaid if you choose in-home care, the overall care costs will go up and that might mean you have high out-of-pocket costs.
On the other hand, moving to an assisted living facility could possibly reduce overall costs and lower your out-of-pocket expense on a monthly basis, even if you dont qualify for medicaid.
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The Medicaid Applicant Must Have An Intent To Return To Their Home
If the Medicaid applicant says they intend to return to their primary residence, generally Florida Medicaid application specialists will not challenge this.
- Even if returning home is not likely, the Medicaid application specialist will still not challenge the assertion.
- However, if the Medicaid-applicant, by their own actions, demonstrates that they really do not want to return home , then the house will be deemed a countable asset. This can get tricky when an older adult chooses to live in an assisted-living facility .
Obviously, if the Medicaid applicant actually lives at home, this is not an issue. When someone qualifies for Medicaid and intends on remaining at home, I typically see the Medicaid plan approve between 20-40 hours per week of home health care. This may not provide 100% of your home care needs, but it can provide family caregivers with much needed respite. In addition, being on a medicaid managed care plan , there are other cash benefits and lowered health care costs.
How Different States Value A Home For Medicaid Eligibility
Each state decides what programs Medicaid offers and the eligibility criteria and the value of ones home equity is one of the eligibility criteria. This means that it is essential to understand the requirements as it pertains to where you live. Many people can get off track due to the wrong information that they find online. Unfortunately, these mistakes can have some drastic impacts such as being denied Medicaid or losing ones home.
In addition to each state having different requirements, the rules regarding home equity can change every year. While this can mean that it is more difficult to find out if you qualify, there are some added benefits to routine changes. For example, as many homes increase in value, some Medicaid recipients would be disqualified from the program if lawmakers didnt increase the amount of equity allowed for their constituents.
It is also important to be aware that they are three types of Medicaid long term care programs: Nursing Home Medicaid, HCBS Waivers and ABD Medicaid. As HCBS Waiver and ABD Medicaid are provided to the beneficiary while they are living in their home, their home is exempt. This is also true if they are applying for Nursing Home Medicaid and their spouse remains in the home.
|50 State Home Equity Exemption Limits for Medicaid Eligibility|
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Setting Up Appropriate Plans And Trusts Can Protect Your Assets Upon Your Death
Using a long-term care trust, your property can be protected from estate recovery when you die, even if you have a long stay in a nursing home. Since your child is not the property owner, it is protected from any bad things that may happen in your childs life as well. A trust allows you to protect your real estate and other assets from long-term care costs while avoiding the risks and negative consequences of outright transfers to children, and there are likely tax implications as well. By transferring your home and other assets into a properly designed trust, you can still reserve an interest in the transferred assets. These advantages are not available when transfers are made outright to a child or children.
Will I Have To Sell My House To Qualify For Medicaid Boracina Cash Home Buy
Medical Team Meeting With Senior Couple In Hospital Room In Order To Afford The Nursing Home Health Care
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When I meet with an elder law client for the first time, their primary concern is often their house. Nothing engenders more anxiety than the thought or the prospect of perhaps having to lose their house. And they ask, âAm I going to have to sell my house in order to qualify for Medicaid? Because my house is worth however much money. And I know thatâs more than $2,000, which is Medicaidâs asset limit. And so what can I do?â And the answer is if you come to me soon enough, you will not need to sell your house. There are a number of strategies that we can deploy that will say, preserve the house, if that is your primary desire.
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Loss Of Ownership Means Loss Of Control
If you transfer your house to your kids, you hope they will maintain it, and do with it as you expect them to. In reality, once you transfer your house to your children they own it. They have the legal right to do whatever they want with it, including selling it.
Even with the best of intentions, the house could still be at risk. If they own it, creditors could place a lien on it. If they get divorced, your former in-laws may wind up moving in.
In Some Cases Transferring Your House Or Other Assets To Spouses Or Children Are Exceptions To The Medicaid Rule Against Transferring Assets
While Medicaid finances most long-term care in this country, Medicaid is supposed to be “the payer of last resort” when it comes to long-term care. Medicaid pays for long-term care only for those who are poor or who have become poor after paying for medical expenses or nursing homes.
Many people try to give away their assets to relatives in order to qualify for Medicaid. But when an applicant gives away property within five years of applying for Medicaid coverage of long-term care, Medicaid presumes that the gifts was made to qualify for Medicaid. This will trigger a period of ineligibility for Medicaid long-term care benefits on the theory that those assets could have been used to pay for the individual’s care.
Not all transfers, however, trigger a period of ineligibility for Medicaid. Federal and state Medicaid laws contain various exceptions to the rule against making gifts within five years of applying for Medicaid for long-term care . Following is a brief review of the most common exceptions.
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Protect Your Home From North Carolina Medicaid Estate Recovery
Federal and North Carolina law require that Medicaid pursue estate recovery after a Medicaid recipient dies. With some exceptions, North Carolina Medicaid must make a claim against the decedents estate for the amount of benefits Medicaid paid for the recipients care during the recipients lifetime. As a practical matter, this will only apply when there is no surviving spouse or disabled child , and when the Medicaid recipient still owned a house when he or she died. Thats because the home is nearly the only asset that it is possible to keep, while qualifying for and receiving Medicaid. While the home is considered an exempt asset for purposes of Medicaid eligibility, it definitely is not protected from being lost to the state. As a result, when a Medicaid recipient dies, the state of North Carolina files a claim against the estate and demands to be repaid. Repayment means the state may require the sale of the family home.
There are ways of protecting your home, discussed generally below.
Make Sure The State Has No Liens On The Home
Some Medicaid recipients choose to sell their homes in an effort to keep up with their bills.
What many people donât know is that the state has the ability to impose a Tax Equity and Fiscal Responsibility Act lien on your home if youâre a Medicaid recipient.
With a TEFRA lien, the government can actually claim a portion of the equity in a sale or transfer in order to offset the costs of long term care.
TEFRA liens canât be placed on a home that youâre still living in, but they can be placed on a home that youâve had to move out of in order to move into a long term care facility.
A lien on your home could complicate the sale and significantly decrease the profit that you hoped to net by selling your home, so make sure you still own your home free and clear before you sell it.
Specific rules may vary by state, so ask a local Medicaid expert for more information before listing your home.
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How Does It Work
There are several strategies for protecting your home from estate recovery. The optimal one depends on your particular circumstances and the state in which you reside. Each state determines its own estate recovery rules, and each strategy comes with its own benefits and caveats. Professional advice from a Medicaid expert is essential.
Below are some potential strategies to protect your home. Note that not all of these are available in every state.
The word “child” is used here simply because adult children of the Medicaid recipient are typically the people involved, but it could be any person or number of people.
Transfer to a Child
In order to protect your home from estate recovery, you will need to ensure that you have no “interest in the home” at time of death. The most obvious solution to this would be an outright transfer to child, in which you simply sign over your home to one of your children. However, this is problematic for a number of reasons.
First, the transfer would be considered a “gift” for Medicaid purposes, and any gift you’ve given over the “lookback period” is subject to a Medicaid “penalty period,” which delays your Medicaid eligibility.
Second, since your child would own it, your home would be subject to any claims made against your child, and therefore could be taken from you if your child becomes divorced, is sued, or files for bankruptcy.
Note that a transfer of the home to a child is also subject to applicable taxes.
Transfer to a Trust
Loss Of Medicaid Coverage
For you to be on Medicaid means you cant pay for your healthcare costs due to low income, age, or disabilities . Whatever eligibility status you met, your Medicaid coverage will be terminated if you sell your house without alerting the authorities within ten days. If you sell the house in your name, you will be tracked and you will be seen as a fraudster.
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