A common assumption is that if you enter a nursing home, Medicaid will immediately take your house to pay for your care. In reality, that is not exactly true. Below are three common scenarios:

1) If you are married, your spouse is always allowed to stay in the house as long as he or she lives. However, after both spouses die, certain States will sometimes put a lien on the home. If that happens, the State will make a claim for the amount they have paid out in Medicaid benefits. This claim would then usually be paid from the proceeds of the house sale after both spouses have passed away. With proper legal planning, this can sometimes be avoided.

2) If your spouse dies while you are still living in the nursing home, Medicaid may demand that you sell the home and use the proceeds for your nursing home costs. Again, depending on the circumstances, you can sometimes preserve the family home. Each situation is different. For example, if a son or daughter is living in the home and provided two years of care to the nursing home resident, this child can sometimes be given the home as a gift to avoid a forced sale by Medicaid. This is usually referred to as the child caretaker exception. Unfortunately, the Medicaid caseworker will not always let you know about this rule.  Another exception is if you have a permanently disabled child. In that situation, the home can usually be given to that child, without adverse Medicaid consequences.

3) If you enter a nursing home and do not have a spouse living in the home, Medicaid will allow you to keep the house for approximately one year. After approximately one year, you must list the home for sale, unless one of the exceptions, such as the child caretaker rule applies. When the home sells, the proceeds must generally be used for your nursing home care. If you die before selling the home, the State will usually put a lien on the home. If that happens, the State will make a claim for the amount they have paid out in Medicaid benefits.

The good news however, is that through proper legal planning, you can sometimes preserve the entire value of the home for future generations. Even in cases where Medicaid demands that you sell the home, there are often ways to preserve a portion of the sale proceeds for your family.

Attorneys who specialize in Medicaid planning are constantly contacted by concerned loved ones and family members wondering “when is the right time to prepare for Medicaid planning.

The answer is that it is never too early or too late to discuss the planning options available. Below is one example of the many types of calls attorneys receive every day where attorneys advise clients that Medicaid planning is an option right now.

SCENARIO:
Mrs. Cohen is an 81-year-old widow experiencing short-term memory loss. She is still able to live alone in her own home. Her income is $750 a month; she has a home worth $735,000 and other assets of approximately $60,000. She heard from a friend that she should give away all her assets now to her kids just in case she would ever need to go to a nursing home. Her friend told her that so long as she gives everything away more than five years before moving to nursing home, she’ll be able to qualify for Medicaid without having to spenddown any of her assets.

Unfortunately, there are many problems with the advice Mrs. Cohen’s friend gave her. First, Mrs. Cohen may need nursing home care in less than five years. Due to this large transfer being made within the five year look back period, she will now be ineligible for Medicaid and will have no funds to pay for her own care. Once the money and house are transferred to her children, those assets actually belong to the children – no strings attached. Even if the children are trustworthy, and would be willing to give the money back if Mrs. Cohen needed nursing home care, once the assets are in their names, the assets are subject to their creditors. One of the children could be sued or go through a divorce. Since the assets are in the children’s names, a lawsuit, tax problems, or a divorce could easily wipe out mom’s life savings, as well as leave her without her home.

Also, keep in mind that Mrs. Cohen may never need nursing home care. Rather, she may need to make a move to an assisted living facility. Medicaid does not always cover the cost of care in an assisted living facility. Therefore, it’s important that Mrs. Cohen hang on to her assets while she’s still relatively healthy so she can have the freedom and independence to pay for the level of care she needs when she needs it.

In this scenario, we would advise Mrs. Cohen to get the proper estate planning documents in place so her children could act on her behalf in the event of incapacity, and to avoid probate in the event of her death. Depending on the family dynamics and Mrs. Cohen’s prognosis, we may advise some type of gift trust planning.

Each situation is unique, so you should consult with a qualified elder law/trusts & estates attorney to go over your best options. The attorney will advise you on the best options available to you which will allow you to use Medicaid to cover the cost of medical care without depleting assets.  In addition, planning in advance is a good option because the penalty period will likely expire before you may need to be admitted to a nursing home.

Medicaid planning allows you to protect your family’s assets from being used to pay for your medical and nursing home care by justifying the need to receive Medicaid in the future to cover those expenses. The attorneys at Yedid & Zeitoune, PLLC have a combined 20 years of legal experience at top New York City law firms and are ready to assist you in all your legal needs. Let us help you prepare for you and your family’s future. May we all only know of happiness – amen!

The attorneys in the Trust & Estates Practice Group at Yedid & Zeitoune have a combined 20 years of legal experience and are ready to assist you with all your estate planning needs.

Isaac Yedid, Esq. and Raymond Zeitoune, Esq.

Yedid & Zeitoune, PLLC 

1172 Coney Island Avenue Brooklyn, New York 11230

Phone: (347) 461-9800    Fax: (718) 421-1695   Email: [email protected]

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