Protecting your home

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Protection of the home, in the event of a need for nursing home care, is a primary concern of many senior citizens. Medicaid, a joint Federal and State program, is the only governmental program that will pay for the cost of long-term nursing home care. Medicaid has strict requirements as to the amount of assets a person may have and still qualify for Medicaid benefits. The principal home, however, generally is a non-countable asset for determination of Medicaid eligibility of the homeowner. Although the Division of Medical Assistance will generally not count the home as an asset for determining Medicaid eligibility, the Division of Medical Assistance is authorized by law to seek a recovery from the home as an asset for all Medicaid benefits provided to the Medicaid recipient at the later of his or her death or the death of any surviving spouse. There are a number of alternative choices available to protect the home from the State's recovery. These choices include:

TRANSFER TO HEALTHY SPOUSE: A home may be transferred without out any Medicaid disqualification from a spouse, going into a nursing home, to the healthy spouse who is referred to, in the law, as the "community spouse".

TRANSFER TO PROTECTED INDIVIDUALS: The law provides an exception from the transfer penalties for transfers to:

1. A disabled children of a homeowner;
2. A child of the Medicaid applicant who had lived in and cared for his or her parent, in that home, for at least two years prior to the parent entering into a nursing home; and
3. A sister or brother of the Medicaid applicant who is already a part owner of the home.

TRANSFER SUBJECT TO LIFE ESTATE: The home may be given away with the Medicaid applicant owner keeping a life estate, that is the right to lifetime use of the property. This option is somewhat complicated and can have some adverse income tax effects if the home is sold during the life of the life tenant.

SALE: The house may be sold to the children of the homeowner, or anyone else, in return for payment by way of a private annuity or a promissory note which can be structured to avoid any Medicaid disqualification period.

IRREVOCABLE TRUST: An irrevocable trust can protect the home from Medicaid recovery. However, the look-back period for determining disqualification from Medicaid benefits is five years so you should plan early to avoid problems.

All of the these options, and others as well, all have estate tax, control and income tax implications that must be considered in your planning. There is no one right way to plan your estate. Your estate plan must be carefully tailored to your own specific desires and needs. The earlier a person plans, the more choices there are available.

You should remember that this area of the law is constantly changing. Before taking any steps, you should consult a qualified attorney.