When seniors need to pay for care, they may be cash poor but living in a
home with substantial equity.
One immediate reaction might be to transfer the house to the children and
then figure Medicaid would pay. That is usually wrong. Unless there is a clear
exception such as a disabled child or Caretaker Child, transfer of a house out of
your name does not work and can disqualify you for benefits. Also Medicaid only
pays for skilled care.
Some seniors move into a CCRC, Continuing Care Retirement Community.
The large initial deposit is often handled by the proceeds from sale of the house.
These communities have different levels of care and many have life agreements
that allow the senior to continue to stay if they run out of funds. To know the
details you should have an attorney review the contract.
Another common solution is to sell the house and spend down the funds in
assisted living/personal care. This does not commit the individual long range and
does have the appeal of living in an attractive environment so long as funds are
available. Note there is no Medicaid “safety net” in assisted living/personal care.
However, you might qualify for tax deductions for assisted living/personal care as
Assets need to be monitored to extend the stay in assisted living. Also, it is
not a good idea to wait until funds run low before applying for nursing home
admission since nursing homes prefer admitting new residents who are able to
pay privately for a period of time before Medicaid picks up the cost.
Reverse mortgages may provide another alternative. They relate to people
who intend to stay in their homes indefinitely and can offer a way to access the
cash value of the property. They help in some cases but if the senior’s condition
worsens to the point she has to move to assisted living or nursing home and the
house is unoccupied for over a year, then the mortgage would go into default.
With all of these possibilities, and many more, the important point to realize
is there is no one right answer for everyone. You need a plan.
Here are some ideas.
Family Agreements can use real estate equity to compensate family members who
help and those who contribute.The majority of Medicaid (government) funds are
used to pay for nursing home care, and not for at-home care and services
although there is an at-home Medicaid waiver program. On the other hand, if a
senior can “hire” her children privately to help with her care, she can extend her
time at home and compensate those children and family members who actually
assist her. Another possibility is to set up a system where adult children
contribute financially toward paying for care by an outside caregiver and other
expenses needed by the parent.
There needs to be a written agreement. It generally must be entered into before
services are performed or payment made. Over the past few years, our office has
prepared increasingly more Family Agreements.
Suppose the senior is limited in cash but has equity in her home or other
real estate. Readers might ask where the senior can get the funds even to pay
Here are possibilities.
Private Reverse Mortgages. We might prepare a Mortgage where the
holder of the mortgage is the adult son or daughter. In exchange for contributing
to a parent’s support, the son or daughter could have a recorded document
reflecting his or her contribution. This takes precedence over most creditors
Whole House for Cost of Half a House. This is joint tenant with right of
survivorship. An adult child could buy fifty percent of the value of his parent’s
residence and actually pay for it. The cash from the child can be used to support
parent’s care at home and assisted living expenses if parent moves. On parent’s
death, the child would become the sole owner of the property and there is no
Parent Purchases Needed Improvements to Adult Child’s Home.
Improvements might need to be made to adult child’s home to allow parents to
move in such as additional bath or bedroom. Parent sells home and uses part of
the proceeds to pay for the improvement. A Written Family Agreement is needed.
Esquire, Colliton Law Associates, P.C. Janet Colliton has practiced law for over 38 years, 37 of them in Chester County, Pennsylvania, a suburb of Philadelphia. Her practice, Colliton Law Associates, PC, is limited to elder law, Medicaid, including advice, applications and appeals, and other benefits planning including Veterans benefits, life care and special needs planning, guardianships, retirement, and estate planning and administration.