A common question asked by elderly clients and their families is “When planning for Long-Term Care (LTC), is it possible to protect their home after mom moves into a nursing home?”
A very “lawyerly” answer is “Yes and No.”
This is why people love talking to attorneys so much.
Nursing home costs and expenses are steep. Unfortunately, many elderly individuals run out of money, but they still need level-term care. It is important to distinguish between what a nursing home wants and what Medicaid may requires. In addition, recent shifts in Medicaid support have opened up alternatives you should be aware of.
How would the Government (Medicaid) “Take” My Home
Medicaid is the Federally-funded, State run program that currently pays for the majority of all LTC expenses of the elderly in nursing homes.(1)
It is a broken, under-funded government program. It provides insurance for the “poor” (2) and Long-Term Care for the “aged, blind, and disabled.” Medicaid is a “means-tested” program. This means, Medicaid defines limits on income and “countable resources.” Countable resources are assets that Medicaid deems spendable toward medical expenses – Long-Term Care and otherwise. These must be spent or structured in an asset protection/controlled spending plan prior to Medicaid paying your nursing home cost.
When a person moves into a nursing home, Medicaid assumes the former residence is no longer needed. To qualify for benefits, Medicaid wants:
- a declaration the home is to be sold or rented,
- a Fair Market Value (FMV) price is charged, and
- an update when the house sells or rents.
If everything else is in order, Medicaid approves the applicant for service. However, Medicaid may pause the applicant’s long-term care support while the net proceeds of the house sale pay the private rate until depleted. Once again, proper, timely planning controls the process to limit or to eliminate Medicaid’s “pause period.”
If the house is rented, monthly net proceeds count as income. This becomes part of the applicant’s contribution to his or her long-term care need. Again, proper, timely planning ensures the income increase prevents loss of Medicaid coverage in case the applicant’s income level is above the Medicaid threshold.
Be aware, upon the death of the applicant/patient, when the family sells the house or goes through Probate, Medicaid makes a claim to be reimbursed for money it paid out for Long-Term Care. It is a high priority claimant, which may claim against any available Probate or Revocable Living Trust assets, or net proceeds from the sale of property.