Moving to a Nursing Home? Find Out How You Can Protect Your Home From Nursing Home Costs
Medicaid provides a variety of healthcare benefits but may recoup spending on beneficiaries after they die by seizing assets in their estate, such as houses. However, you can take steps to protect your home from Medicaid estate recovery.
If you are preparing to move yourself or a parent to a nursing home, you need to understand that you do not have to sacrifice the family home to qualify for Medicaid. Medicaid eligibility is based on income and asset limits. But there are ways to remove your home, most people’s most valuable asset, from Medicaid calculations.
The Raleigh Medicaid planning lawyers at the Brady Cobin Law Group, PLLC, have helped North Carolina families make the arrangements necessary to obtain long-term residential care for more than 35 years. We know how to help you preserve your home and other assets while qualifying for Nursing Home Medicaid benefits. Continue reading to learn how to avoid losing your house to the need for nursing home care.
How Can a Nursing Home Take Your House?
Medicaid is a wide-ranging, jointly funded state and federal healthcare program for low-income people of all ages. Among the primary Medicaid recipients are nursing home residents.
Many elderly people who need the long-term residential medical care that nursing homes provide do not meet Medicaid’s low income and assets eligibility requirements. But if they cannot afford nursing home care on their own, as is often the case, they can “spend down” assets to become eligible for Medicaid.
Nursing home Medicaid payments cover the cost of room and board, assistance with activities of daily living (i.e., bathing, mobility, and eating), skilled nursing, and medication administration at Medicaid-certified nursing home facilities. Not all nursing homes take Medicaid, but most do. Most nursing home residents have gone through some form of the “spend down” process to meet Medicaid eligibility requirements.
After an elderly nursing home resident dies, federal and North Carolina laws allow the N.C. Division of Medical Assistance to make a claim against the deceased person’s estate to recover some of what Medicaid spent for the recipient’s care.
Usually, the only property in a Medicaid recipient’s estate at death is his or her home, because an individual’s home is considered an exempt asset for purposes of Medicaid eligibility.
The state may pursue a claim against the property that is part of a decedent’s probate estate if real estate is held:
- Solely in the decedent’s name
- Under co-ownership as a “tenant in common” without the right of survivorship.
The state will not pursue estate recovery in any of these situations:
- There is a surviving spouse
- There is a surviving minor or disabled child
- Hardship can be proven (a full or partial waiver under very limited circumstances)
- The total Medicaid benefit subject to recovery is less than $3,000 or the total assets of the estate are less than $5,000.
The state will waive estate recovery as long as any of the exceptions above exists.
When Medicaid estate recovery moves forward, the state is a sixth class creditor against the estate in probate, which means the Division of Medical Assistance is paid after settling property liens and paying funeral and burial costs, and state and federal taxes.
Protect Your Home from Medicare Estate Recovery
Most people deplete their savings to pay for nursing home care, at which point they qualify for Medicaid nursing home assistance. If there is no spouse or child living in their home, they will likely sell it along with other assets to pay for nursing home care.
But with proper Medicaid eligibility planning, a homeowner need not sell their home or other assets to make themselves eligible for Medicaid.
If you are moving to a nursing home, the biggest roadblock to protecting your home and other assets from estate recovery upon your death is Medicaid’s look-back period for asset transfers. The government will look at transfers and gifts made as long as five years before the date of an application for assistance. If an applicant has shifted assets within the look-back period for less than market value, a penalty period may be triggered, during which that individual cannot receive Medicaid.
Fortunately, there are exemptions for transferring a primary residence. You may transfer ownership of your home without penalty to:
- Your spouse.
- A caretaker child. A caretaker child is defined as a child of the Medicaid applicant who lived in the home for two years or more prior to the applicant’s move to a nursing home and whose care for the applicant delayed the need for nursing home care.
- A sibling who already has an equity interest in the house and lived in the house during the year immediately preceding the Medicaid applicant’s nursing home admission
- A disabled or blind child under the age of 21
- A trust for the exclusive benefit of a disabled individual under age 65.
Often the spouse who receives sole ownership of the couple’s home is eventually in the same situation – needing to shed assets to obtain Medicaid nursing home benefits – but without a spouse exemption. A child or sibling who receives a home they intend to sell may run into tax issues they should discuss with a lawyer or accountant.
After the prospective nursing home resident transfers ownership of the home to their spouse or another eligible recipient 55 years old or older who plans to live there, the recipient should consider establishing a life estate. This is a type of joint property ownership with the right of survivorship that gives each owner the right to the property as long as they live, except that they cannot sell or mortgage the property. When one owner dies, full ownership transfers to the other without going through probate.
This is an efficient way to transfer property from one generation to the next while keeping the property beyond the reach of Medicaid estate recovery. If a life estate was established at least five years before either owner needed to apply for Medicaid services, the ownership transfer would not be subject to a “look back” penalty.
Contact a Raleigh Medicaid Planning Attorney for Help
Medicaid offers significant healthcare benefits to the elderly, but planning ahead is necessary to obtain the benefits without putting your home at risk down the road. The estate planning attorneys at Brady Cobin Law Group have more than 35 years of experience helping individuals in Raleigh and throughout Wake County protect their homes as they seek needed Medicaid benefits. Contact us online today or phone (919) 782-3500 to begin planning for your needs that are likely to arise.