As published in the Houston Chronicle, Senior Living Section, March 25, 2009
Will I Lose My Home If I Accept Medicaid In A Nursing Home? By Wesley E. Wright, Attorney At Law and Molly Dear Abshire, Attorney At Law ______________ The answer is maybe. In 1965 when President Johnson signed into law the Medicaid program, there was a portion of the new Act that authorized the states to implement an estate recovery program. These programs allowed the states to seek reimbursement from the decedent’s estate for benefits paid on behalf of the decedent. In 1993, this authority was changed from voluntary to mandatory.
Subject to certain exceptions, the decedent’s assets are subject to Medicaid estate recovery to the extent that benefits were paid to the beneficiary after 55 years of age. Since the homestead is generally the most valuable asset in the decedent’s estate, and is not counted as an asset to determine Medicaid eligibility, it is the primary target of estate recovery upon the death of the beneficiary.
The Deficit Reduction Act (DRA) of 2005 exempts the homestead from being counted as a resource against the beneficiary in an amount up to $500,000 for an individual if he or she intends to return to the home and of any value for a couple. But those considering nursing home Medicaid eligibility must look beyond the initial eligibility determination and consider what will happen upon the death of the beneficiary. Most people with a home do not have a problem with eligibility since the allowable values of the home are so high. The critical point that must be considered is the point in time that the beneficiary passes away.
The DRA provides clear exemptions from estate recovery and if the beneficiary qualifies for an exemption, then the decedent’s estate avoids estate recovery. Unfortunately, the exemptions are conditional. The facts that may give rise to an exemption if the person died today may not exist at the time of the beneficiary’s death.
For example, Mr. and Mrs. Smith own a home valued at $150,000 at the time Mr. Smith enters the nursing home and applies for Medicaid. Since a couple may own a home of any value and still qualify for Medicaid, the home will not impede eligibility. The couple is happy that they can keep the home, and are also pleased when made aware that there will be no estate recovery against an estate in which the Medicaid beneficiary is survived by a spouse. The subsequent reliance on this exemption can be detrimental if one is unaware of the fact that approximately thirty percent of the community spouses die first. If the community spouse precedes the spouse in the nursing home in death, then unless other exemptions or protections are available, the house will be subject to an estate recovery claim.
The adverse effect of the estate recovery process is that it places potential applicants for Medicaid in fear of losing their homestead due to the receipt of benefits. This places elderly couples and even individuals in a position in which they will sometimes avoid entry into a nursing home out of fear of losing their home and stay in their own home even though it is detrimental to their health or the health of another, such as the spouse. An experienced elder law attorney will be able to come up with a plan of protection that will most likely help the person in need obtain Medicaid benefits without losing the home to estate recovery in the end.
every yr the laws seem to be changing to supercede what the elderlaw attys come up with to protect the assets. seems the govt is determined to get their medicaide monies at some point by any means:) divvi
The way around this estate recovery is that the home needs to be put in the community spouses name once the spouse is placed in a NH, no transfer penalty for this and the home is not in the NH spouse's name when they die, thus no estate recovery unless both spouses are in a NH on Medicaid.
I have an appt next week with my attorney to sign quit claim deed to our property xferring it into my name. All our other assets have been xferred into my name. The atty has set up a special trust for everything if I should die first. The trust would be used only for things that Medicaid doesn't cover if and when he has to go into a nh. The way the laws are in WA atty says that will work for now. Until they change the law :-)
At least in Maine there is a 5 year "look back". I am considering transfering the ownership of our (my wife's) house to a trust for our kids, but I have to be sure to do this at least 5 years before she has to apply for medicaid or there is a penalty (I'm not completely sure how it works). If the house is in my name, I can continue to live there, but on my death the state will get their "pound of flesh".
No Marsh, even in the State of Maine if the house is in your name only and your wife is on Medicaid and dies, there will be no Estate recovery because the deed would have your name only and therefore not be in your wife's estate. The key here is that if the house is in both names as joint, one goes into the NH, then the Community spouse needs to get the home into their own name and it falls outside any estate recovery law.
Your wife may never have to go into a NH, never have to apply for Medicaid, you could die before she does, we do not know the future and the Medicaid laws could change and you could have a 10 year look back. It is safest to just keep things in your name, wait until the first spouse dies before making transfers to your kids, your life could change and you may not want to live where you are now for the rest of your life.
Jane, 1n 1990 we went to a Estate Planning Lawyer and he had us change all our deeds to both our names, as tennants in common. Since that time I have had 2 other Elder lawyers look at our things and they neither had any other recommendations. Does this tennants in common take the place of changing the deed to just my name or if not when should I do it?
I've been told by an elderlaw attorney that there's no point in putting the house in my name at this point. The reason is that my husband has substantial assets in his retirement account, which cannot be "spent down" without incurring a big tax bill. It sounds to me like the normal spend down process--gifting, spending on allowable items, really isn't practical when a retirement account for the disabled person is involved. I know I can buy an annuity with my retirement account, but was told that we can't with his (in an effort to preserve assets). So I guess that younger people, who generally more of their assets in retirement accounts, will be less able to qualify for Medicaid?
Imohr, the Tennants in common keeps the home safe, the thing we are speaking of here is Estate Recovery. The part of the home that is in your husbands name under tennants in common when sold would go to his estate, thus Medicaid could invoke an Estate recovery on his part. I would hesitate to advise you something different if your Elder Law attorneys have told you differently. I think the house should go into the community spouse's name once the patient applies for Medicaid.
marilyninMD We were in the same situation as you are with the retirement accounts, we have taken them in large sums each year and paid the tax as much as I hated to do so. As we did this we transferred the funds into our joint checking account and then into my name only. I hated to make the large draws yearly but yet we felt that the lump sum tax requirement that would be required if we ever had to apply for Medicaid would be much larger if we waited. It has taken years for us to get this done. If your husband takes a set amount monthly that is irrevocable then Medicaid would only count his income from the retirement account, but at the end the balance of the retirement account would be in Estate Recovery up to the amount Medicaid had paid on his care. It is a no win situation if you are trying to save the assets unless you start taking yearly draws and get it out.
Thanks, Jane. I guess I should consider taking large sums out of the IRA as you did, but I hesitate to do it--just can't stomach paying those taxes when who knows what the future holds? I'm really hoping that the LTC insurance will suffice in paying the expenses. Besides, our IRAs are in annutites with a guaranteed payment, but if we take more than 5% of the value of the account yearly, the guarantee is revoked.
I have been wondering if I shouldn't be taking more out of our IRA's now. I would expect the taxes to be higher in coming years than they are right now.
Imohr, remember if you talk to your Attorney speak of looking at MEDICAID, NOT MEDICARE as you posted.
marilyninMD No, we do not know the future, with LTC you might not have to apply for Medicaid especially if it is a lifetime LTC and not just 3 years, if the IRA is already a guaranteed payment and you are allowed to take more Medicaid would require you to liquidate it as long as you have the right to do so. It is a catch 22, you just have to plan the best you can for your own situation. So many times people are more concerned about saving taxes and do not realize that taxes go up and up and that if they are faced with a situation such as this disease is giving us that the lump sum you would be required to take upon applying for Medicaid would be far more in taxes than a regular large withdrawal. You just have to do what is best in your given situation. Each person and situation is different.