One of the most frequent concerns I hear from clients in my estate planning and elder law practice is the fear of losing their home to the nursing home if they need long-term care. This is a valid concern when it comes to Medicaid and estate planning. Long-term care can cost upwards of $14,000 per month. If the long-term care recipient is not able to pay those costs, then Medicaid (sometimes called MassHealth in Massachusetts) will pay. However, there is a cost associated with having MassHealth pay long-term care costs. First, in order to be eligible for Medicaid benefits to pay for that care the applicant must meet the strict financial criteria imposed by the program. Second, to the extent a Medicaid recipient owns assets at his death, the state can seek reimbursement from those assets for the funds it expended on the Medicaid recipient. So, what happens to the home when the owner needs long-term care? Here are five things to know about Medicaid and the home.
- You don’t have to sell it, but there will be a lien. Many people think that they must sell their home in order to be eligible for MassHealth benefits. Sometimes they believe this because they have been told so by the long-term care facility caring for their loved one. This is not the case. The home is a so-called ‘non-countable’ asset (up to $878,000 of value in 2019) for purposes of determining Medicaid eligibility. That means that a person can receive Medicaid benefits to pay for nursing home costs and still own his home. However, the Commonwealth will file a lien against the property with the registry of deeds unless the owner’s spouse or a child or sibling who meets specific requirements is still living in the home. The amount of the lien is the amount the state pays on behalf of the Medicaid recipient. As such, the house cannot be sold during the owner’s lifetime without re-paying the state. In addition, the applicable MassHealth regulations require that the lien be satisfied within 9 months of the appointment of a Personal Representative following the death of the homeowner.
- Keeping the home can be challenging. Although the regulations permit a Medicaid recipient to own her home, this can be challenging since all but a small amount of the recipient’s monthly income must be paid to the nursing home each month. As such, there is no income available to pay the real estate taxes, insurance, utility bills and the cost of upkeep on the home. In some cases, family members will pay these expenses and hope to be reimbursed when the home is eventually sold. In other cases, the home will be rented and the rental income used to pay the property expenses. Both of these options present challenges and should be thoughtfully considered before embarking on either and require proper Medicaid planning with an attorney that specializes in long-term care matters.
- Transferring ownership of the house to the spouse in the community is usually advisable. Many married couples own their home as tenants by the entirety which is a special form of joint ownership for married couples. This form of ownership means that when one spouse dies, the house belongs entirely to the surviving spouse without the need for probate. Although the house is a non-countable asset and the state is not permitted to file a lien against the property if there is a spouse residing in the home, it is usually prudent to transfer the home into the name of the community spouse when one spouse needs long-term nursing home care. The reason for this is to protect the home from a lien (see #1 above) in the event the community spouse predeceases the nursing home spouse. There is no ineligibility period imposed for transfers of assets between spouses (see #4 below).
- Special rules for certain transfers of the home and the look-back period. The general rule for long-term Medicaid benefits eligibility is that if the applicant (or his or her spouse) gave away assets within the 5-year period preceding the application for benefits, he or she will not be eligible for benefits. This is sometimes referred to as the Medicaid look-back period. This penalty applies to transfers of the home as well as other assets even though the home is a non-countable asset. However, there are some exceptions to this transfer penalty rule. The most commonly used exception is the exception for transfers between spouses. The Medicaid regulations permit assets, including the home, to be transferred between spouses without the imposition of any penalty period. Taking advantage of this exception is a good way for a married couple to protect the home from a Medicaid lien or claim when one spouse needs long-term care. Other exceptions to the transfer penalty include transfers to a blind or disabled child, to a child who has provided care to the applicant (subject to a variety of requirements), and to certain types of trusts.
- Long-term care insurance can help. Long-term care insurance is insurance that pays for care at home, in assisted living, or in a nursing home. This type of insurance can be expensive, however, there is a lot of flexibility in the type of policies available and the amount of coverage that can be purchased. Massachusetts has a law preventing the state from filing a lien or claim against the home if the Medicaid recipient has a long-term care insurance policy which meets certain minimum criteria. In order to protect the home, the policy must: 1) have a minimum benefit of $125/day; 2) provide coverage for a period of at least 2 years; and, 3) still be in place at the time of admission to a long-term care facility. (Note that long-term care policies issued prior to March 15, 1999, need only provide for $50/day of coverage in order for the owner to be eligible for the lien exception.)
The prospect of losing one’s home to long-term care costs is scary. However, there are steps that can be taken to reduce the risk that this will happen. If you or a loved one are faced with the prospect of long-term care or entering a nursing home and want to protect your home or other assets from loss to future long-term care costs, seek advice from an experienced elder law attorney to learn about your options for doing so.
Attorney Suzanne R. Sayward is a partner with the Dedham firm of Samuel, Sayward & Baler LLC which focuses on advising its clients in the areas of estate planning, estate settlement and elder law matters. She is certified as an Elder Law Attorney by the National Elder Law Foundation, a private organization whose standards for certification are not regulated by the Commonwealth of Massachusetts. This article is not intended to provide legal advice or create or imply an attorney-client relationship. No information contained herein is a substitute for a personal consultation with an attorney. For more information visit www.ssbllc.com or call 781/461-1020.
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