What Medicaid Applicants and Families Need to Know About Selling the House
Determining what to do with a house when applying for or when on Medicaid is like navigating your way through a minefield. Here are some considerations regarding sale or transfer of the family residence.
1. Know Whether the Medicaid “Spend Down” Rules Apply. For the most part, the family home is considered an “unavailable asset” for Medicaid spend down purposes. What this means is that, as long as the applicant for Medicaid might return home, the government generally does not force the person to sell the residence to pay for nursing home care. If his spouse lives at home, the house is protected during the life of both spouses. If the spouse in the nursing home dies first, there is no claim against the surviving spouse.
This does not end the discussion. Suppose the nursing home resident is unmarried. Even if there is no claim during life, after the Medicaid resident dies, the government will submit a claim as a creditor and the house might be sold then anyway. The family of an unmarried Medicaid recipient may have paid the taxes, mowed the lawn (check over here to hire the best lawn services), and cared for the empty exempt house but on their family member’s death, need to sell it anyway to satisfy the government’s claim. If there are questions, it is best to obtain professional advice.
2. Suppose the Medicaid applicant’s spouse wants to move to an apartment or a smaller house. If another home is being purchased, it may be better for the spouse to “trade up” than to “trade down.” A new residence still remains exempt. On the other hand, if the wife who lives at home moves to an apartment or a less expensive home and cash is left, that additional cash could delay the date when her husband would qualify for Medicaid. When a spouse has extra cash, the answer, strangely enough may include buying an immediate annuity, one that pays out monthly to the spouse at home. The immediate annuity must meet all of the requirements of the federal Deficit Reduction Act including naming the government as a beneficiary at a later date. If it does not comply with all of the requirements, then the purchase could be considered a transfer with penalties attached. This strategy is new and one that requires more explanation than there is room in this column. However, it can be very helpful to the spouse at home.
3. Gifting the Residence Is Usually Not the Answer. Parents may think that they can solve problems regarding their residence by giving it away to their children. Unless there is an exception such as the Caretaker Child exception, this is usually not the way to go. If parents give away their residence and then attempt to begin coverage under Medicaid within 60 months, not only will the house lose its status as being an “unavailable” resource but the equity in the house will need to be spent down before a parent qualifies for Medicaid. In the alternative the house needs to be transferred back but at the right time. It does not help to sell a property for $1 or for less than fair market value. This would also be considered a gift under Medicaid. Consider How the Property Is To Be Titled. Transferring the house entirely into a husband’s name when his wife is entering a skilled nursing facility or to the wife if the husband is entering a nursing home is not a problem. In fact, it is preferable. This is one exception to the statements regarding gifting. The reason for this is that the government considers a husband and wife together as one unit. Transfers from joint ownership to the person who remains at home (the “community spouse”) give the healthy spouse added control and flexibility.
Problems occur when someone else’s name other than a spouse is added to the title since this will likely be considered gifting.
4. When In Doubt, Consult a Professional. Medicaid rules are not easily interpreted. Actions may be taken but families need to know the effect before taking action. It is better to determine how a deal should be structured in advance than to attempt to reconstruct or correct it later although, if enough funds are left, this can often be done as well.
About the Author Janet Colliton
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.