by Anita Schnee, Attorney at Law
Home ownership is the American Dream. People work hard all their lives to own a home, and it is often their most valuable and significant possession. So when health begins to fail and the need for long-term care arises, we often get this fear-filled question from our clients: will they take away my home?
The enormous and on-going costs of nursing-home care are astronomical, on average around $8,500.00 a month depending on location. The joint federal and state Medicaid program foots the bill for one in four of around 75 million recipients in this country. This is an enormous drain on government funds. To recoup some of those costs, then, the Medicaid rules permit states to take the value of a recipient’s home in some cases, to reimburse the program for funds it has expended.
Yet, because a home is such an essential family possession, the rules treat a primary residence as exempt – that is, its value is not counted as available to pay for nursing-home care from the home-owner’s pocket, before Medicaid kicks in. The home is protected, to a certain extent, for the benefit of Medicaid recipients and their close relatives.
That protection can be lost, however. The value of the house can be counted against a Medicaid applicant, and benefits denied or curtailed, when:
- A home-owner has no living spouse or dependents, and
- The owner moves into a facility permanently, with no intent to return home, or
- The owner dies.
In other words, as long as the owner expresses the intent to return home, and the owner’s spouse or disabled or blind child live in the home, the home will not be counted against the owner for Medicaid-eligibility purposes. The rules on this point vary from state to state, but that is the general idea.
Once the owner passes, however – or, in some states, even before that – the state is permitted to place a lien on the home, to secure reimbursement of the value of the Medicaid services the owner received. This lien makes it impossible to sell the home or refinance a mortgage, without first paying the state what it may be owed.
We elder-law attorneys know a number of ways to protect homes from this kind of attachment. If you come to us at least five years before you anticipate needing nursing-home care, we can preserve your home or its value such that Medicaid will not count it, or lien against it, at all.
Or, if a child moves into the home and cares for an ailing parent for two years, permitting the parent to stay home and out of a nursing home, the house can then be given as a gift to that child without any Medicaid penalty or disqualification. Ordinarily, Medicaid heavily penalizes giving away property, but this is one exception.
There are other strategies available. The home can be given to a disabled child without penalty or disqualification. Or, you might keep the right to live in the house for your lifetime and deed the remainder interest to others, who will then own the house after you pass. This can reduce Medicaid penalty or ineligibility.
Or, you can convert the value of the house into income, while retaining the right to live there, by means of reverse equity mortgages or private annuities or trusts.
These strategies can be complicated, however, and they can come with certain downside risks. An overall plan that is tailored to suit each individual, and to meet as many contingencies as possible, requires juggling a number of puzzle-pieces. There is no one cookie-cutter solution. So, well before when you think you or your spouse may need nursing-home care –
