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The Biggest Question in Medicaid Planning

Posted by Daniel J. Eccher, Esq. | Mar 17, 2020

Homeownership is the American Dream. People work hard all their lives to own a home, and it is often their most valuable and significant possession. So when health begins to fail and the need for long-term care arises, we often get this fear-filled question from our clients: will the state take away my home? 

The enormous and on-going costs of nursing-home care are astronomical, on average around $8,500.00 a month (nationally) - and as much as $13,000 a month in Maine. The joint federal and state Medicaid (locally known as MaineCare) program foots the bill for one in four of about 75 million nursing home residents in the country. This program is an enormous drain on government funds. To recoup some of those costs, Medicaid rules permit states to make a claim against the estate of the recipient for the value of what the state paid for their care. Often, the only asset of the estate is the recipient's home - and in many cases, the claim is greater than the value of the home. 

Because a home is such an essential family possession, the eligibility rules treat a primary residence as exempt – that is, its value is not counted as available to pay for nursing home care from the homeowner's pocket, before Medicaid kicks in. The home is protected, to a certain extent, for the benefit of Medicaid recipients and their close relatives. 

That protection can be lost, however. The value of the house can be counted against a Medicaid applicant, and benefits denied or curtailed, when:

  • A homeowner has no living spouse or dependents, and
  • The owner moves into a facility permanently, with no intent to return home. 

In other words, as long as the owner expresses the intent to return home, and the owner's spouse or disabled or blind child live in the home, the home will not be counted against the owner for Medicaid-eligibility purposes. 

Once the owner passes, however, the state may place a lien on the home, to secure reimbursement of the value of the Medicaid services the owner received. This lien makes it impossible to sell the home or refinance a mortgage without first paying the state what it is owed. (The State of Maine cannot collect on an estate recovery claim if a surviving spouse who is a joint tenant lives in the home, but the state has the authority to assert the claim after the surviving spouse dies.) 

As elder law attorneys, we know a number of ways to protect homes from this kind of claim. If you come to us at least five years before you anticipate needing Medicaid coverage of nursing-home care, we can preserve your home or its value such that Medicaid will not count it or place a lien against it at all. 

In rare cases, if a child moves into the home and cares for an ailing parent for two years, permitting the parent to stay home and out of a nursing home, the house can then be given as a gift to that child without any Medicaid penalty or disqualification. (Ordinarily, Medicaid heavily penalizes giving away property within 5 years of applying, but this situation is an exception.) 

Other strategies are also available. The home can be given to a disabled child without penalty or disqualification. You might keep the right to live in the house for your lifetime and deed the remainder interest to others, who will then own the house after you pass. However, each strategy comes with risks that must be fully explored before determining the best option for you. 

An overall plan that is tailored to suit each individual and to meet as many contingencies as possible requires juggling a number of puzzle-pieces. There is no "one size fits all" solution. The key is to plan before you or your spouse need nursing-home care (although some strategies for asset preservation can be employed just before - or even after - nursing home admission). 

As one piece in the overall picture of a balanced estate plan, we can help you save your home. We welcome the opportunity to work with you. 

If you have questions or need guidance in your planning or planning for a loved one, please do not hesitate to contact our Winthrop, Maine office by calling us at (207) 377-6966.

About the Author

Daniel J. Eccher, Esq.

Daniel J. Eccher, Esq. is the Managing Shareholder at Levey, Wagley, Putman & Eccher, P.A., in Winthrop, Maine. Dan's favorite problem to solve is helping clients figure out how to afford long-term care while having something left for their family.

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