Protecting Your House From Medicaid Estate Recovery
- May 29th, 2021
After a Medicaid recipient dies, the state must attempt to recoup from his or her estate whatever benefits it paid for the recipient’s care. This is called “estate recovery.” For most Medicaid recipients, their house is the only asset available, but there are steps you can take to protect your home.
Life estatesFor many people, setting up a “life estate” is the simplest and most appropriate alternative for protecting the home from estate recovery. A life estate is a form of joint ownership of property between two or more people. They each have an ownership interest in the property, but for different periods of time. The person holding the life estate possesses the property currently and for the rest of his or her life. The other owner has a current ownership interest but cannot take possession until the end of the life estate, which occurs at the death of the life estate holder.
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Example: Jane gives a remainder interest in her house to her children, Robert and Mary, while retaining a life interest for herself. She carries this out through a simple deed. Thereafter, Jane, the life estate holder, has the right to live in the property or rent it out, collecting the rents for herself. On the other hand, she is responsible for the costs of maintenance and taxes on the property. In addition, the property cannot be sold to a third party without the cooperation of Robert and Mary, the remainder interest holders.
Using Medicaid To Pay For Long
The cost of long-term care in a skilled nursing facility is very expensive. On average, it costs more than $100,000 a year. Most people dont have the resources to be able to pay such a large expense out of pocket. So what is a family to do if they do not have the funds to pay for care and they dont want to sell the family home?
When considering options to pay for the care of a loved one, many people mistakenly believe that Medicare will pay for it. Medicare is the primary health insurance benefit for people 65 and older. There is a lot of confusion between Medicare vs Medicaid, but for the purposes of long-term care it is important to understand that the maximum amount of time Medicare will pay for care in a skilled nursing facility is 100 days. Additionally, the care provided in the facility must be related to a hospitalization that was covered by Medicare.
Medicaid, on the other hand, is the benefit used when a family member will need long-term care for an extended period of time. Medicaid is actually the largest payer of long-term care in the United States. While there are different ways to pay for long-term care, they can be very restrictive and not as widely accessible as Medicaid. As a result, most families who have an aging or ill loved one use Medicaid benefits to pay for long-term care.
Can You Protect Your House From Medicaid By Giving It To Your Kids
The cost of care in a nursing home or other long-term care facility is high and continues to rise. If you ever need nursing home care, the Medicaid program will help you pay for itafter you “spend down” your assets to the point where you qualify for benefits. You likely won’t have to sell your home in order to qualify for Medicaid, but Medicaid can make a claim against your estate after your death to recover funds it expended on your behalf. This process, called estate recovery, may result in a claim against your house. Can you protect your house from Medicaid by giving it to your adult children?
The answer is a definite maybe. There are some circumstances in which you can transfer your home to an adult child to keep it out of the clutches of Medicaid. However, there are better ways to protect this cherished asset, and at least a few very good reasons you may not want to transfer it to your children.
Recommended Reading: What Is The Income Limit For Medicaid In Ohio 2020
What Happens Once An Altcs Recipient Dies
- You must notify the state of the ALTCS recipients death so they can stop all future benefit payments.
- Once notified, the state will begin the estate recovery process to reimburse costs. As with any other creditor at time of death, the state must file a claim during the probate process.
- For those with Miller Trusts, all remaining funds in the trust go to the state.
- In some instances, a Medicaid recipients house can be taken after death to recoup care costs. Sometimes ALTCS will put a TEFRA Lien on a home before the recipients death.
Common Strategies To Protect The Home From Medicaid Recovery
May 14, 2018 | by the National Care Planning Council
In a previous article we addressed the state Medicaid recovery programs and how they typically go after the only remaining asset which is the home. In this article we will discuss some of the strategies that can be used to protect the home from Medicaid estate recovery. There are a number of strategies that can be used. In those states that go after probate property only, anything that keeps the house out of probate will suffice. In other states, some common strategies include the use of irrevocable trusts or transfers before death.
Most of these strategies involve giving away ownership of the home. This creates a penalty either for a potential Medicaid application or for someone already on Medicaid whose name was on the property. There are also a number of strategies to deal with this penalty. The reason for creating a penalty through an outright gift or a trust is to start the five-year look back. Another reason might be to get the property out of the name of an aid and attendance applicant.
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How Can I Protect My Home
Consult With an Attorney. One of the most valuable steps in protecting your home from Medicaid Estate Recovery is speaking with an attorney. Doing so will inform recipients and their families on what their options are, and help them feel at ease. Its best to speak with an attorney before moving into a nursing home.
Transfer the Home. Transferring a home incorrectly may incur a transfer penalty, so consider consulting an attorney when doing so. Thankfully, there are certain situations where homeowners can transfer their homes without incurring any transfer penalties.
People can freely transfer their home to their spouses, disabled child, a child under 21, or a child that is also their caretaker.
Institutionalized recipients can also transfer their home to a sibling with an equity interest in the home as long as they lived there before the institutionalization. Recipients can also transfer the propertys money value into a trust for a disabled individual under the age of 65.
Still have questions? We are here to help. Fill out our online request form, and well have a licensed agent reach out to assist.
I Thought Only Rich People Needed A Trust
Option 2 of the top ten ways to protect your money and house from Medicaid or a nursing home is using an asset protection trust. What is a Medicaid asset protection trust? It is an irrevocable trust. It works best as a Preplanning tool. Remember in Option #5 where I explained the difference between a Mainecare Crisis Plan and a Mainecare Preplan? A Mainecare Crisis plan is when you know someone is going into a nursing home, or they have been discharged from the hospital, and are going into a nursing home. Preplanning is when you dont know if one or both of you will need to spend time in a nursing home. But even after reading options 10 through 3 many clients are reluctant to put their money or their house in an irrevocable trust. Why? They dont want to lose control. They ask, if I put my property in an irrevocable trust, wont I lose control over it? The short answer is yes and no.
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Medicaid May Have A Future Claim On The Home
While Medicaid won’t force the sale of the home if a nursing home resident intends to return to it eventually, the agencyknown as MassHealth in Massachusettscan put a lien against the house. The lien can cover all of the nursing home care that was paid for by the agency. When the property is sold, MassHealth can seek payment on that lien.
In some cases, the agency may also be able to recover money for its payments from the nursing home residents estate after that resident passes away.
Assisted Living And Skilled Care
The most common time you hear about people losing their homes regarding health care is when they move into assisted living.
Medicare does not cover Assisted Living Facilities , and most people pay for those costs out of pocket until they no longer have the money to do so. Once all liquid assets have been exhausted, many people qualify for Medicaid. Once on Medicaid, Medicaid will assist in paying for assisted living.
Since Medicare does not cover assisted living facilities, they have no stake or ability to put a claim or lien on your home.
Medicare will typically cover hospital and medical services but not custodial care.
Read Also: Apply For Medicaid Insurance Online
Estates Subject To Merp
The federal government has general guidelines for MERP, but specifics vary from state to state. The basic federal guidelines place your estate at risk if youre at least 55 years old and receiving long-term care services paid for by Medicaid.
Specifically, the text of the legislation that implemented MERP clarifies that costs can be recovered for “nursing facility services, home and community-based services, services in an institution for mental diseases, home and community care, and community-supported living arrangements” for people who were 55 or older when the care was provided.
But states also have the option to use estate recovery to recoup Medicaid costs for a person who was permanently institutionalized, even if they were younger than 55. States can also implement estate recovery for any Medicaid spending incurred after enrollees turn 55.
Depending on where you live, your estate could be subject to MERP even if you never accessed long-term care as a Medicaid enrollee.
Check with your state Medicaid office to understand how MERP is enacted within your state and what costs are subject to recoupment.
How Will Medicaid Affect My Assets Without A Plan Or Trust In Place
In elder law estate planning and Medicaid planning, our clients at ElderLawLexington frequently ask us if the nursing home or Medicaid can take the home to pay ones nursing home bill. Upon the death of a Medicaid recipient, the state may seek repayment of its outlays for the seniors long-term care. The Medicaid Estate Recovery Program recoups this money by filing claims against any assets a Medicaid recipient held an interest in at the time of their death, such as a home. For example, say a person was in a Medicaid-certified nursing home for two years, and the state paid the nursing home $4,000 each month for their care. If the house was still in the persons name at the time of death, then to repay the state the $90,000, the house would have to be sold. As previously stated, with expert planning, seniors can ensure that their homes will stay in the family after their deaths and not be lost to estate recovery.
The best way to save your house from Medicaid recovery is by putting the house into an irrevocable trust. A trust protects the home because the individual no longer owns the house. The parents can also be protected from the children deciding its time for the parents to move out. There are also tax benefits for the children if a trust is used as opposed to an outright gift.
Contact us at ElderLawLexington to discuss the best way to save your house from Medicaid.
What Is An Estate
An estate is property, such as money, a house, or other things of value that a person leaves to family members or others when he or she dies. MERP does not apply to all property that a person may own.
Examples of property that the state will not collect on include:
- Life insurance policies that name a person to receive the payment.
- Bank accounts that are paid on death to another person.
How Do I Keep The Estate After An Altcs Recipient Dies
If you plan ahead, you can potentially avoid most, if not all, of the states estate recovery. If youve waited until after the ALTCS beneficiarys death to think about any of this, it may seem hopeless, but all is not lost. You can still potentially keep some of the estate, though not all of it. In this scenario, you should consider hiring an expert to ensure you save as much money as possible.
We can help, whether youre just starting the ALTCS application or if youre currently going through the probate process. Each situation is unique, but call us today and we can hopefully answer any questions you may have.
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Sell The House And Use Half A Loaf
Selling the house is generally only an option if a spouse or another member of the family does not need to live there. Selling the house might be an option for a single Medicaid beneficiary. Selling the home should be weighed against keeping the home as an exempt assets due to the Medicaid beneficiary signing an intent to return. The amount of recovery against the house depends on how much Medicaid has to pay for the beneficiary. If this is a sizable monthly amount it could add up quickly. Under these circumstances, over a period of a year or two, recovery could eat up the value of the home. If this is the case, the possibility of selling the home sometime prior to applying for Medicaid or shortly after applying for Medicaid should be considered. If the Medicaid obligation is not significant, perhaps the family could be satisfied with a recovery against the home.
Funds from the sale of the home will disqualify the Medicaid beneficiary until he or she has spent down to less than $2,000. However, a half a loaf gifting strategy could be used to transfer approximately 50% of the funds to someone else. This strategy might make sense for these reasons.
- Anticipated recovery against the house — which is currently exempt — will eat up its entire value fairly quickly
- Selling the home while the owner is alive takes advantage of the capital gains exclusion and reduces or eliminates the taxes owed on capital gains
How To Avoid A Nursing Home From Taking Your House
Despite all the eating healthily, getting enough sleep, and working out advice, there are high chances that you or a member of your family may require nursing home services sooner or later. Senior citizens are most affected, with those over 65 years having a 70% chance of needing some form of long-term care. An additional 20% may reside in a nursing home for more than half a decade.
With such high numbers needing these essential homes, it shouldnt surprise you they cost an arm and a leg. A semi-private room goes for an average price of $255, but if you cant stand your room mates chatter and snore, you can part with an additional $35 to make it $290 per day or $8,821 per month.
Many residents pay directly out of pocket until they exhaust their entire life savings and have nothing more to offer, forcing the nursing home to go after their assets to continue funding their stay. The federal government has the Medicare program for those from lower economic backgrounds, but not everybody qualifies for the program.
So, what are your option to prevent a nursing home from taking your house?
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Asset Protection And The Five Year Lookback
What is the five year lookback? What is the 60 month rule? When answering the question how can you protect your assets from Medicaid or Mainecare, first you must understand what Mainecare is. Medicaid is a government program that pays for a nursing home if you cant afford it. In Maine it is called Mainecare. But how does Medicaid or Mainecare know if I can afford it? They look at 60 months, or five years worth of your financial history. That is the 60-month rule or the five year lookback with nursing homes and Medicaid. So, you say to me, what if I give my stuff away 60 months or 5 years before I apply. Yes! The lawyer says, that will work. However, you must be careful. Also, you should have a backup plan in case you are in need of care before the five year period has run.
Asset Protection Gifting Strategies that Dont Work
However, now youre back to our number 10 on the top ten list give your assets away. You have no assets. But, you say, wont the person I gave my assets to be so grateful for the gift that theyll use the assets to pay for my private room? Remember the private room in number 10? For private room fill in the blank with anything you might want that will make your quality of life a little better but may not be covered by Mainecare. Or maybe you arent in a nursing home. Now youre the one who has an expensive home repair. Or maybe you just want to buy a new car.
Yes! The lawyer says, that will work BUT now you have no stuff!