How Does The State Define Undue Hardship
The state may consider it a hardship when:
- The estate property was a family business, farm, or ranch for at least 12 months before the person on Medicaid dies, and is the main source of income for the heirs.
- The heirs would need financial help from the government if the state filed a MERP claim to get money back.
- The heirs could stop getting financial help from the government if the state did not file a MERP claim.
- The person who died received services because he or she was a crime victim.
- There are other circumstances that may create a hardship.
One type of hardship applies just to the home. If the value of the homestead is under $100,000, and if one or more of the heirs have family income under a certain amount, the state may not ask for money back. In 2019, this income limit for one person is $37,470. For a family of two, it is $50,730. These figures are adjusted each year.
The state will not grant a hardship request unless the person’s heirs ask for it and provide the requested proof of the hardship.
If the estate has debts, such as funeral costs, legal costs, or a home mortgage, those costs are paid before a MERP claim is paid.
Assets That Can Be Transferred Without Penalty
When determining eligibility, not all resources are considered available to be used for the applicant’s care. Some examples include household goods and personal effects, one automobile , certain pre-paid funeral plans, and property used for self-support, such as income-producing property or property used in a business. If all of the conditions contained in state and federal laws are met, these assets do not have to be liquidated to pay for the Medicaid applicant’s long term care. For that reason, federal and state laws generally allow for the gifting of those assets to others for little or no compensation.
While the applicant’s primary residence isn’t usually considered available to pay for the applicant’s care , Medicaid laws do not allow for the applicant’s house to be gifted to others without penalty.
Dangers Of Giving Away Assets To Qualify For Medicaid
The first problem with giving your property away is that the government closely examines your spending and gift history when you apply for Medicaid. If you have gotten rid of an asset without receiving fair market value in return, you wont necessarily be denied benefits. Instead, the government imposes a “period of ineligibility” depending on the amount of uncompensated transfers in the previous five years. This is known as the lookback period.
Theres no way the government wont find out about an improper gift. You have to submit financial documentation to prove your eligibility for public benefits. For each month you could have paid for nursing home costs with your own assets, your benefits will be delayed by one month. If you have to enter a nursing home during this time, Medicaid will not cover the costs.
In most cases, creating a Medicaid asset protection trust is a much better method than giving everything away. Consider the impact of each strategy on your:
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Understanding What Medicaids Goal Is
Medicaid is concerned about people selling their homes to get out of the program. They want to be sure that people arent taking advantage of the system, and they also want to make sure that those who need help can still receive it.
If you plan to sell your home, please get in touch with us first. We can help you through the process and ensure that everything goes smoothly.
We buy houses, and we want to make sure that you have all the information you need before moving forward. Contact us now if you have any questions or concerns about selling your home.
To Sell Or Not To Sell That Is The Question
When deciding whether or not to sell the home, you must factor in any expenses or upkeep difficulties it may cause you or your family members. If you or a family member is spending a lot of time and money just to take care of an empty home, you might consider selling it. You have to determine the long-term costs it will produce and factor that into your decision. However, if the home is occupied, it might be a better idea to keep it. Lets explore whether to sell or not to sell.
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What Is A Medicaid Lookback Period
The Medicaid lookback period is a period of time in which any transfers of assets to family members may be subject to scrutiny for Medicaid eligibility. If it’s determined that you specifically transferred assets during the lookback period in order to qualify for Medicaid, this can affect the benefits for which you’re eligible.
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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Life Estates In North Carolina
Setting up a life estate can protect a home from estate recovery. However, proceed in this area with caution, and only after getting advice from a qualified and experienced elder law attorney. There are traps for the unwary in life estates, and many people dont find about them until its too late.
A life estate is a form of co-ownership of real property between two or more people. They each are an owner of the property, but for different periods of time. The person owning the life estate has the current right to the property for the rest of his or her life. The other owner has a current ownership interest but has no right to control the real estate until the life estate owner dies causing the end of the life estate. The owner of the life estate is often called a life tenant while the other owner is called the remainderman because he or she owns the remainder of the property.
When Sally dies, the house will pass directly to John and Peggy as remaindermen and it will not go through probate. Because the property is not part of Sallys probate estate, it is exempt from North Carolina estate recovery. Another benefit of the life estate is that for tax purposes, the property will get a stepped up basis at Sallys death. That can meana significant reduction in capital gains taxes payable when Robert and Mary sell the property after Sally dies.
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.
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Can I Sell My House Despite Medicaid Estate Recovery
I have been receiving Medicaid benefits for ten years and had no idea until recently that the state could seek money for medical expenses they paid for after I turned 55. I am 65 and am planning to sell my house in a few years and move out of state to retire. Can they seek money from the sale of the house? If I die in another state, will they go after my estate, leaving less money for my heirs? Does the state seek the original amount of the medical expense or one increased for many years of inflation?
Theres good news and bad news. First, the good news: You can sell your house without reimbursing the state for the Medicaid benefits you have received to date. The state can only put a lien on your house if its paying for nursing home care for you.
Now, the bad news: The states claim for reimbursement against your estate applies no matter where you live. However, many states only seek recovery against the beneficiarys probate estate and you may be able to avoid the claim by using a trust, joint ownership, or a life estate to hold title to your new home and other assets. A local elder law attorney can advise you on what steps make the most sense in your situation and in your new state. You can find one at www.elderlawanswers.com.
And the not-so-bad news: In calculating the amount of recovery, Medicaid agencies use the actual amount paid out without interest or any adjustment for inflation.
Can You Buy A House While Youre On Medicaid
You can technically buy a house while youâre on Medicaid, but it might not make a lot of sense.
If youâre purchasing a house that wonât be your primary residence, you will disqualify yourself from Medicaid since your countable assets will likely exceed your stateâs threshold.
The reality is that if youâve qualified for Medicaid, you probably donât have the means to go out and buy a new house, even if you can qualify for a mortgage.
However, you might be able to afford a new house if youâre taking the proceeds from a house youâve just sold and spending them on your new home.
In that case, buying a new house is allowed if the house you purchase will be your primary residence, or if you have the âintent to return.â
Individuals who are living in a long-term care facility arenât able to live in a house as their primary residence and are unlikely to have a realistic âintent to returnâ due to health limitations.
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Pros And Cons Of Selling The Home
The most obvious reason to sell the home is to use the cash proceeds to pay for the cost of assisted living.
Before we dive into the nuts and bolts of selling a home to pay for assisted living, I want to explore the pros and cons so that you can be informed and empowered to make a decision that is right for you.
Medicaid Says I Have To Sell My House Will This Plan Work
Q. I have a house. Its not fancy but its livable. I applied for Medicaid and I have to sell it down. My grandson said he would buy it for me and let me live there for as long as I can. Will that work?
A. Thank you for your question.
Medicaid eligibility can be very complicated.
In New Jersey, there are several different Medicaid programs and they have different financial eligibility requirements and program benefits.
A house owned by an unmarried Medicaid applicant with no minor or disabled children living in the house is an exempt asset if the Medicaid applicant lives in the house or has an intent to live there, and his or her equity interest is not greater than $906,000 in 2021, said Shirley Whitenack, an estate planning attorney with Schenck, Price, Smith & King in Florham Park.
She said there are Medicaid programs whereby the applicant can receive benefits in the home.
If the New Jersey Medicaid applicant is in a long-term care facility for six months or more, the agency presumes that the applicant will be unable to return home and requires the house to be sold, she said. If the house, is sold for less than fair market value, however, Medicaid will consider the purchase to be a gift and a penalty will be imposed that will disqualify the Medicaid applicant from receiving benefits when they otherwise run out of money for a period of time depending on the amount of the uncompensated transfer.
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Pros Of Selling My House While On Medicaid
The advantages of selling your house while on Medicaid can only be pointed at by an elder law attorney. This is because, without their help, you will lose the proceeds from the house if you sell it.
Not only that, you will lose your Medicaid coverage. It is better to be familiar with the Medicaid requirements in your state before you sell the house.
How Does This Program Work
When a person applies for Medicaid and long-term services and supports, the state provides a notice that explains MERP. When the person dies, the state sends a different notice to the estate representative or heirs to let them know that the state intends to file a claim. The notice will ask the representative for information so the state can decide whether to file a MERP claim.
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Seek Specialized Real Estate Assistance
It is critical to find a real estate agent knowledgeable about the specialized needs of seniors. Through experience or specialized training and credentialing programs, such agents are familiar with senior housing options, the Housing for Older Persons Act, possible schemes and scams and the implications of various financial transactions. A specialist can guide you in making appropriate sales decisions and refer you to other experts as needed. Check your prospective agent’s marketing information or talk to her broker to confirm that she has credentials or experience working with senior clients.
How And When Medicaid Can Pay For A Nursing Home
Medicaid was created in 1965 as a social healthcare program to help people with low incomes receive medical attention. Many seniors rely on Medicaid to pay for long-term nursing home care.
Most people pay out of their own pockets for long-term care until they become eligible for Medicaid. Though Medicare is an entitlement program, Medicaid is a form of welfareor at least thats how it began. So to be eligible, you must become impoverished under the programs guidelines, says Laura M. Krohn, a Rhode Island-based elder law attorney.
Let’s look at how the economics work, and how Medicaid can be used to pay for a nursing home.
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How Would Medicaid Know If You Sell Your House
Medicaid is a needs-based program, which means that applicants must have few resources to qualify. As a result, Medicaid closely monitors an individuals assets, including home equity. If an applicant for Medicaid has more than $500 in home equity, they will not be eligible for coverage.
However, there are some exceptions to this rule. For example, if the applicant is disabled or over the age of 65, they may be able to exempt their home from the asset test.
In addition, if the applicant lives in a community property state, it will count as only half of the houses total value.
Get Authority To Sell
The first step to getting the home sold is to establish proper authority and legality to sell the home. Average homeowners dont have to worry about this since authority and legality is rarely an issue.
However, when dealing with aging parents, someone with dementia, or other capacity limits, it can call into question the validity of any contract.
And therefore, will call into question a purchase agreement between a buyer and a seller.
Each case is going to have to be evaluated on an individual basis. For that reason, its recommended that you seek legal counsel.
But here are some things that you need to think about and ask yourself:
- Am I or my parent of sound mind?
- Do I need the courts permission to sell my parents house?
- Can what Im doing be misconstrued as undue influence on my parent?
- If I have a power of attorney , conservatorship, or guardianship, do I have legal authority to sell the home on behalf of my parent?
In contract law, for a contract to be enforceable, a person must be of sound mind. This could potentially disallow someone with dementia from selling a home. Or, it may not.
Be prepared to keep records and have justifiable proof of authority and validity of a contract. Lenders and title companies will require it prior to closing on a home.