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Hooper Law Office,LLC Estate Planning Blog

Monday, August 11, 2014

Will the Nursing Home take my House?

Typically, for purposes of determining qualification, the Medicaid office will ignore the personal residence of a Medicaid applicant.  This is especially true for married couples.  You could be living in a house valued at $500,000 or more, and still qualify for Medicaid as long as the other criteria are met.

There is a lot of bad nursing home advice given, and much of that bad advice centers around the family home.  Often, couples are told that they should "give the house to the kids."  There are several problems with this advice:

1) After the divestment penalty period, the home may be protected from nursing home expenditures and estate recovery; however, it is now at risk from creditors of your children.  Divorcing spouses, business problems, or personal injury lawsuits can be a bigger risk than the nursing home.

2) You have converted an asset that is considered in determining Medicaid eligibility into a  transfer for which you will be penalized.  The penalty will be a certain number of months that the transferor is ineligible for Medicaid.  the number of months that a  person is ineligible is determined by dividing the value of house, less the value of any retained interest, known as a life estate, by the monthly amount that Medicaid pays nursing homes.  For instance, if the house less the value of the retained life estate was valued at $210,000 and the state paid $7,000 per month for Medicaid-qualified residents, then the penalty period would be $210,000 divided by $7,000.  That is 30 months of ineligibility for transferring an asset that would have been ignored by the Medicaid office had it not been transferred. 

Always talk to a qualified estate and Medicaid planning attorney prior to transferring the residence.  Transferring the house may be a viable and important transaction, but it is often a matter of timing.  Do it at the wrong time or under the wrong circumstances and you will be creating more problems than you are solving.


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