Will my friend lose her house to Medicaid if she goes into a nursing home? | Latest Lifestyle News
“Once the home is gone, their kids will have no inheritance.” (Photo subject is a model.) – Getty Images/iStockphoto
There is an elderly person in my family, a beloved friend and relative, whose health has gone downhill.
She owns a home and doesn’t want to go to a nursing home. One reason is because she has heard she will lose her home in order for Medicaid to pay for the nursing home.
Once the home is gone, her kids will have no inheritance. It’s of grave concern to her. She would like to leave her kids something after she dies. Is it true she will lose their home, or is there a legal loophole?
Trying to Help
Your friend is correct, up to a point, and will have a choice to make. – MarketWatch illustration
Your friend is lucky to have your help. These are good questions to ask.
To be eligible for Medicaid, in most states, a person must have no more than $2,000 in countable assets, which includes bank accounts and investments, and a maximum of $2,901 a month in income (or $5,802 for married applicants).
A prospective Medicaid recipient’s 401(k) and IRA accounts are also countable for eligibility, although rules vary by state. There is a five-year Medicaid look-back rule to review whether someone divested themself of assets in order to qualify for benefits. But it sounds like your friend’s needs are more urgent and can’t wait five years.
There are exceptions to this look-back rule, which include paying off debts, buying medical devices and making home renovations for accessibility.
Your friend is correct, up to a point, and she will have a choice to make. If their condition worsens, and if she is unable to remain in their home and cannot afford home help, that choice may ultimately end up being made for them.
Medicaid rules are different for married couples than for single people. For example, if your friend had a spouse who continued to live in the house, the property would be exempt from Medicaid calculations regardless of the amount of equity or the market value.
Every state sets a home-equity interest limit to determine if a person’s home will be counted toward or exempt from the Medicaid asset limit, according to AgingCare, an online forum focused on helping people like your friend navigate the complexities of eldercare.
“If a senior is single and their equity interest — fair market value minus debts like a mortgage — in their primary residence exceeds a certain amount,” the group says, “then the house will be counted as an asset, almost certainly causing them to be disqualified from Medicaid coverage.”
Story Continues
Intent to return is key. “The home will be exempt from the asset limit if the Medicaid applicant lives in the home, will continue to live in the home once they become a Medicaid recipient and meets their state’s home equity interest limit,” the group says.
Florida, New York and California, among other states, exempt a primary residence from assets calculated by Medicaid under certain circumstances. In many states, if a person or their spouse needs to live in the home or they have plans to return to it, it can remain exempt.
“Once the intent to return is nullified, a home becomes a countable asset that can be used to pay for long-term care,” the organization says. “It is always a good idea to put one’s intent to return home in writing as soon as possible after entering a nursing home.”
While one’s home may not be counted toward Medicaid’s asset limit, it is not exempt from the Medicaid Estate Recovery Program. After your friend’s death, the state Medicaid agency may attempt to be reimbursed for care costs out of whatever remains of the estate, including the home.
In addition, if your friend is a Medicaid recipient and receives an inheritance, it must be reported to her state Medicaid agency, generally within 10 calendar days.
Some people plan ahead for Medicaid eligibility by establishing an irrevocable trust early enough to avoid the five-year look-back rule. By transferring assets into an irrevocable trust, your friend would no longer own them and, therefore, they would not be counted by Medicaid.
A Medicaid Asset Protection Trust can protect the assets of a person who wishes to apply for Medicaid, as long as it is established before the look-back period.
Your friend could include stocks and bonds, bank accounts and CDs and secondary properties, if any, in the trust. However, they would be giving up control of these assets. In addition, Medicaid can challenge a MAPT, and the challenge can be complex and expensive.
Other exemptions, depending on where the person lives, include one vehicle, as long as it’s used to get to and from work or to obtain medical treatment, or it is essential because the person has a disability. Clothing, furniture and wedding rings are also typically exempt, while artwork is not.
Talk to your friend and her children about her care. That should come first before any inheritance.
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