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 long-term care. It is important to distinguish between what a nursing home wants and what Medicaid may require. 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)
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Medicaid 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 exchange, 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. Medicaid 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.
In Indiana, July 1, 2018, Medicaid created a state-wide policy that every person who was 55 or older at death must consider Medicaid a reasonably identifiable creditor and be notified as such.
This is a huge shift whether the decedent had long-term care expenses or not!
Medicaid is now seeking reimbursement for payments it made, including its contributions through the HIP program. Because of Medicaid’s position in payment priority order and its potential claim period, this may make many estates insolvent when a person dies.
How Would a Nursing Home “Take” My Home
Similarly, a nursing home asks about property, including the person’s home, during the admission process. They expect the home to be sold to private pay for the LTC. It is important to understand, it is in a nursing home’s best interest to have you private pay as long as there are dollars available.
A nursing home may charge upwards of $8,000 to 9,000 a month in our area – there are less expensive and more expense facilities. When Medicaid pays a person’s nursing home fee, Medicaid pays substantially less. That is one reason why many facilities have a limited number of “Medicaid beds.”
A nursing home reviews all of an elderly person’s assets – and if married, the spouse’s assets – to determine what to use to pay for Long-Term Care before it applies for Medicaid.
So, can the nursing home or Government/Medicaid take your home.
No, but both will assume and, in a matter of speaking, encourage a family to sell the home to private pay the nursing home cost before Medicaid begins to cover some of the necessary care.
Does an Elderly Person Seeking Long-Term Care Have to Sell a Home?
(See, it can be easy to talk to an attorney)
BUT (most attorneys have a big “but” with their Yes’s and No’s), in order to control whether a home, other real estate, or property in general needs to be sold, design and execute a well-thought-out plan in a timely fashion.
When Should a Person Start to Plan to Control What Happens to an Elderly Person’s Home?
Prior to your visit to a nursing home is good. When the possibility of a need for Long-Term Care is on the horizon is far better. If you already visited a nursing home, some planning options are available. However, the nursing home and Medicaid hold far more control at that point.
Additionally, recent changes in Medicaid support provide some alternatives to Long-Term Care support in a nursing home. Most people prefer to stay in their homes as long as possible. That is now something that Medicaid allows at an increasing level. As another alternative, Medicaid provides Long-Term Care support in some Assisted Living Communities in our now.
If there is a Long-Term Care possibility, it is best to have a conversation with an Elder Law attorney about concerns, assets, income, wishes, and options. I suggest you find an Elder Law Attorney who is willing to provide this initial consultation for no charge or a very limited fee. You need to understand your unique situation and the planning options to consider. It is possible that some planning techniques require implementation sooner to maximize your control. However, you also want to understand the thresholds of care that warrant pursuing LTC. An Activities of Daily Living scale defines for Medicaid whether a person needs long-term care. It is also the scale a Long-Term Care insurance company uses to start its coverage.
An Elder Law Attorney can explain options that might be available in-home that may allow an elderly person to stay in his or her home longer. This is usually the preference.
What Can Really Be Done? Can I Just Put the Home in a Family Member’s Name?
There are several specific techniques that may be implemented to protect all or a portion of the value of a home, including purchases of a life estate, personal loan, joint purchases, personal service contracts, and post-pay to a family member for in-home care.
Each of these requires specific planning in design and execution. They require commitments from the elderly person and the participating family member or friend. Every technique is not appropriate for every situation. Hence, find an Elder Law Attorney willing to provide a free consultation to talk to you about your specific situation and the options that are comfortable for those involved. There is information below about how you can meet with me for your free consultation.
By the way, one bad “planning” technique is putting the home in another person’s name. People do this – and people still tell others this works. It is important to understand, Medicaid is the government. They have access to a lot of information about you. They create a “penalty period” equal to the value of the transfer that could have been used to pay the nursing home. See “The Double Penalty of the Penalty Period.”
Just When You Think You Understand Protecting the Home – Estate Recovery Pops Up
It is one of those “You can pay me now or you can pay me later” situations.
You have implemented and properly executed a plan that keeps the home from being sold and used to pay for a nursing home. However, if Medicaid does end up paying for a portion of nursing home care, the State can file a claim against your house after the person dies.
Estate Recovery allows the State to make a claim against your estate to be paid back. It can only make a claim for what it spent, which would be substantially less than a similar period of private pay. For example, private paying a nursing home for six months may cost close to $50,000 ($8,000 x 6). However, Medicaid would pay less than $5,000/month during the same six months. Medicaid has a set reimbursement (approximately $5,000, less Social Security and less other income paid to the nursing home). So, the State could make a claim for much less than $30,000. That could still be substantial. However, a proper plan should have provisions to reduce what is available to be available for Medicaid to file its claim against.
Good, properly timed planning is the answer!
Accordingly, before it is time for your loved one to enter a nursing home, you should consult with an experienced Elder Law & Estate Planning Attorney. With advanced planning, you can find ways to preserve some or all of the value of the home. Without proper, timely planning, any equity interest in a home may be required to be used to privately pay for LTC.
What Should All of this Planning Cost?
At CCSK Law, we strive to lower hurdles between our client’s legal issues and questions and the solution. One big hurdle is a fear of cost. It is a legitimate concern. The reality is some attorneys charge $5,000 to $15,000 for “Medicaid Planning.” Some may also charge an additional fee for the actual Medicaid application process.
In some cases, extensive planning is warranted. In other cases, it may not be.
If you do not understand what is being charged and why it is pertinent to your situation, you need to ask for a better explanation. Some things do not work for everyone. In addition, most planning techniques require precise timing, execution, and a commitment from people other than the person in need of care.
Valparaiso Elder Law & Estate Planning Lawyers
One of the biggest assets that many elderly people own is their home. However, what happens to the home if they must enter a long-term care facility can be worrisome. For this reason, it is important to review the options available to protect your or your parents’ home and to plan accordingly. Because planning is unique to each person, it is important to understand what will work best for you.
It can be complicated.
It is important to consult an experienced Indiana Elder Law and Estate Planning Lawyer, like me. I can advise you of any options you might have, and the consequences of each. And I’ll do it in a way that you will understand what and why the options work for you.
Call me, RG Skadberg, the Indiana Elder Law and Estate Planning Lawyer at CCSK, LLC today at (219) 200-3902. Or, click to learn more about RG Skadberg and to schedule your 30-minute free consultation.
(1) The Scan Foundation Report – thescanfoundation.org(2) “Poor” is relative to the Federal Poverty Level (FPL) that is released by the US Government annually. Under the Affordable Care Act, people who had income within 140% of the FPL income-qualify for Medicaid Insurance. Indiana currently calls its Medicaid program HIP 2.0.
Originally published in May 2017, this article was updated to reflect Medicaid changes and links to additional information in March 2018