Estate Planning Blog Articles

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What Happens to My Home If I Leave It to a Medicaid Recipient in My Will?

When a beneficiary is on Medicaid and she’s set to get a bequest of the grantor’s home in her last will, the question may arise about the impact on her Medicaid benefits.

The answer will depend on the Medicaid program and what the daughter decides to do with the house, says nj.com’s recent article entitled “What happens to my daughter’s Medicaid if I leave her my home?”

Medicaid provides health coverage for some low-income people, families and children, pregnant women, the elderly, and people with disabilities.

In some states the program covers all low-income adults below a certain income level.

Medicaid programs are required to follow federal guidelines, but coverage and costs may be different from state to state.

Here, if the daughter receives Medicaid because she also receives SSI or has ABD Medicaid, the house will not be counted as a disqualifying asset if the house is the daughter’s principal place of residence.

If the daughter sells the house, the sale proceeds would be countable.

If she is getting expanded Medicaid through Obamacare, her eligibility would be based on income. So, if the daughter rented the house or sold the house, the income that would be generated could disqualify her from continuing to receive benefits, depending on the amount of income she gets.

If the daughter is disabled, consider leaving the daughter the house in a special needs trust. With a special needs trust, there’s a legal arrangement and fiduciary relationship that allows a physically or mentally disabled or chronically ill person to enjoy trust assets without jeopardizing their eligibility for Medicaid.

A Medicaid Asset Protection Trust is an irrevocable trust, and assets placed in the trust are considered completed gifts to the beneficiaries, protecting the assets from Medicaid (after the look-back period).

With a Medicaid Asset Protection Trust, even if the house is sold, the sale proceeds wouldn’t disqualify the daughter from receiving Medicaid.

Ask an experienced elder law attorney for help with this situation.

The laws regarding Medicaid and Medicaid eligibility are extremely complex and vary from state to state. Accordingly, nothing in this article should be considered legal advice.

Reference: nj.com (July 30, 2021) “What happens to my daughter’s Medicaid if I leave her my home?”

Can a Retired Police Officer Qualify for Medicaid?

An 84-year-old retired police officer recently took a fall in his home and injured his spinal cord. He retired from the police force more than 20 years ago and received a lump sum.

Currently, he gets more than $2,000 per month from his pension and Social Security.

How does this retired police officer spend down to qualify for Medicaid, since he is now a paraplegic?

State programs provide health care services in the community and in long-term care facilities. The most common, Medicaid, provides health coverage to millions of Americans, including eligible elderly adults and people with disabilities.

Medicaid is administered by states, according to federal requirements. The program is funded jointly by states and the federal government.

Nj.com’s recent article entitled “How can this retired police officer qualify for Medicaid?” advises that long-term services and supports are available to those who are determined to be clinically and financially eligible.

A person is clinically eligible, if he or she needs assistance with three or more activities of daily living, such as dressing, bathing, eating, personal hygiene and walking.

Financial eligibility means that the Medicaid applicant has fewer than $2,000 in countable assets and a gross monthly income of less than $2,382 per month in 2021.

The applicant’s principal place of residence and a vehicle generally do not count as assets in the calculation.

If an applicant’s gross monthly income exceeds $2,382 per month, he or she can create and fund a Qualified Income Trust with the excess income that is over the limit.

The options for spending down assets to qualify for Medicaid are based to a larger extent on the applicant’s current and future living needs and the amount that has to be spent down.

Consult with an elder law attorney or Medicaid planning lawyer to determine the best way to spend down, in light of an applicant’s specific situation.

Reference: nj.com (July 19, 2021) “How can this retired police officer qualify for Medicaid?”

Do I Need Long-Term Care Insurance?

Women face some unique challenges as they get older. The Population Reference Bureau, a Washington based think tank, says women live about seven years longer than men. This living longer means planning for a longer retirement. While that may sound nice, a longer retirement increases the chances of needing long-term care.

Kiplinger’s recent article entitled “A Woman’s Guide to Long-Term Care” explains that living longer also increases the chances of going it alone and outliving your spouse. According to the Joint Center for Housing Studies of Harvard University, in 2018 women made up nearly three-quarters (74%) of solo households age 80 and over. Thus, women should consider how to plan for long-term care.

Ability to pay. Long-term care is costly. For example, the average private room at a long-term care facility is more than $13,000/month in Connecticut and about $11,000/month in Naples, Florida. There are some ways to keep the cost down, such as paying for care at home. Home health care is about $5,000/month in Naples, Florida. Multiply these numbers by 1.44 years, which is the average duration of care for women. These numbers can get big fast.

Medicare and Medicaid. Medicare may cover some long-term care expenses, but only for the first 100 days. Medicare does not pay for custodial care (at home long-term care). Medicaid pays for long-term care, but you have to qualify financially. Spending down an estate to qualify for Medicaid is one way to pay for long-term care but ask an experienced Medicaid Attorney about how to do this.

Make Some Retirement Projections. First, consider an ideal scenario where perhaps both spouses live long happy lives, and no long-term care is needed. Then, ask yourself “what-if” questions, such as What if my husband passes early and how does that affect retirement? What if a single woman needs long-term care for dementia?

Planning for Long-Term Care. If a female client has a modest degree of retirement success, she may want to decrease current expenses to save more for the future. Moreover, she may want to look into long-term care insurance.

Waiting to Take Social Security. Women can also consider waiting to claim Social Security until age 70. If women live longer, the extra benefits accrued by waiting can help with long-term care. Women with a higher-earning husband may want to encourage the higher-earning spouse to delay until age 70, if that makes sense. When the higher-earning spouse dies, the surviving spouse can step into the higher benefit. The average break-even age is generally around age 77-83 for Social Security. If an individual can live longer than 83, the more dollars and sense it makes to delay claiming benefits until age 70.

Estate Planning. Having the right estate documents is a must. Both women and men should have a power of attorney (POA). This legal document gives a trusted person the authority to write checks and send money to pay for long-term care.

Reference: Kiplinger (July 11, 2021) “A Woman’s Guide to Long-Term Care”

What Happens to My Home If I Go to a Nursing Home?

An aging parent who does not have any other assets and believes she would end up on Medicaid sooner rather than later, may not know what would happen to the house that is in both her name and the name of her son.

Nj.com’s recent article entitled “What happens to my house if I go into a nursing home?” says that timing is everything, and the answer may depend on when and how the son obtained his interest in the parent’s house.

If the parent owned the house and put her son’s name on the deed along with hers, the parent made a gift of an interest in the house to her son.

Medicaid has a five-year look back period when a senior applies for Medicaid.

If an applicant made any gifts during this look back period, a penalty period will apply. During that time, an applicant isn’t eligible for Medicaid. However, if the gift was made prior to the five-year period, the penalty period is inapplicable.

If the son bought the interest in the parent’s house, the Medicaid lookback rules don’t apply.

However, in any event, Medicaid requires an applicant to “spend down” her assets to $2,000 (in most states, but the amount may vary) to qualify for the program.

A home the parent or a spouse or disabled child are living in will be considered exempt. However, it won’t be exempt if the parent, spouse, or disabled child, aren’t living in it and have no expectation of returning to it.

If the parent will not be living in or returning to her home, the parent will need to sell her interest in the home before she qualifies for Medicaid.

Alternatively, the parent and her son will have to sell the home, and she will have to use her share of the proceeds before she can qualify for Medicaid.

In addition, if the son is also providing a level of care for the parent for a period of at least two years, the parent has allowed you to stay in her home and not have to relocate to a nursing facility sooner. This exception has a complex set of rules.

Medicaid is complicated and the above information is only general in nature. Medicaid rules sometimes change and can even be applied differently based on where you live. You should consult with an estate planning or elder law attorney to make certain you take the steps that will be most beneficial to your specific set of circumstances.

Reference: nj.com (June 4, 2021) “What happens to my house if I go into a nursing home?”

What Is Elder Law?

With medical advancements, the average age of both males and females has increased incredibly.  The issue of a growing age population is also deemed to be an issue legally. That is why there are elder law attorneys.

Recently Heard’s recent article entitled “What Are the Major Categories That Make Up Elder Law?” explains that the practice of elder law has three major categories:

  • Estate planning and administration, including tax issues
  • Medicaid, disability, and long-term care issues; and
  • Guardianship, conservatorship, and commitment issues.

Estate Planning and Administration. Estate planning is the process of knowing who gets what. With a will in place, you can make certain that the process is completed smoothly. You can be relieved to know that your estate will be distributed as you intended. Work with an experienced estate planning attorney to help with all the legalities, including taxes.

Medicaid, Disability, and Long-Term Care Issues. Elder law evolved as a special area of practice because of the aging population. As people grow older, they have more medically-related issues. Medicaid is a state-funded program that supports those with little or no income. The disability and long-term care issues are plans for those who need around-the-clock care. Elder law attorneys help coordinate all aspects of elder care, such as Medicare eligibility, special trust creation and choosing long-term care options.

Guardianship, Conservatorship, and Commitment Matters. This category is fairly straightforward. When a person ages, a disability or mental impairment may mean that he or she cannot act rationally or make decisions on his or her own. A court may appoint an individual to serve as the guardian over the person or as the conservator the estate, when it determines that it is required. The most common form of disability requiring conservatorship is Alzheimer’s, and a court may appoint an attorney to be the conservator, if there is no appropriate relative available.

Reference: Recently Heard (May 26, 2021) “What Are the Major Categories That Make Up Elder Law?”

When do Medicaid Recipients have to Cash Stimulus Checks before Government Collects?

Medicaid enrollees are generally allowed to have only a limited amount of assets, outside of their primary residence, car and other essentials.

For singles, it’s typically about $2,000. Those who exceed that threshold could be deemed ineligible for the health insurance program for low-income Americans.

CNN’s recent article entitled “Nursing home residents have a little more time to spend stimulus checks before losing Medicaid” notes that the $1,200 stimulus payments that many people received last spring didn’t count as income under Medicaid rules.

As a result, nursing home residents didn’t have to give the money over to the facilities where they live and could save it for their own use.

However, the funds are considered an asset after one year. That is a deadline that is rapidly drawing near for the first of the three relief payments Congress has authorized since the pandemic began.

Even so, another coronavirus provision that lawmakers approved last March prevents states from disenrolling residents from Medicaid during the public health emergency, which is currently set to end next month. However, it’s expected to be extended again.

This means that Medicaid recipients, including nursing home residents, don’t have to worry about spending the funds until the pandemic is over.

The same is true for the $600 checks many received from the December relief bill and the $1,400 payment that is being distributed from President Biden’s $1.9 trillion recovery package, but the time on those funds started more recently.

Just the same, people shouldn’t wait until the last minute to spend their stimulus funds. They can buy things they need and can also give the money to family or friends or make a charitable contribution. They just need to prove that the gift isn’t part of a strategy to give away assets to qualify for Medicaid.

“People should just be conscious of Medicaid asset limits and deal with it without trying to wait until the last month of the public health emergency,” said Eric Carlson, a directing attorney with Justice in Aging, a non-profit legal advocacy group. “There’s no particular benefit to cutting it close.”

Reference: CNN (March 30, 2021) “Nursing home residents have a little more time to spend stimulus checks before losing Medicaid”

Should I Worry about Medicaid Estate Recovery?

What is It? The Medicaid Estate Recovery Program (MERP) may be used to recoup costs paid toward long-term care. It’s designed to help make the program affordable for the government, but it can financially affect the beneficiaries of Medicaid recipients.

AOL’s article entitled “What Is Medicaid Estate Recovery?” explains that’s where Medicaid can help fill the void. Medicaid can assist with paying the costs of long-term care for aging seniors. It can be used when someone doesn’t have long-term care insurance coverage, or they don’t have the assets to pay for long-term care out of pocket. It can also be used to pay for nursing home care, if you’ve taken steps to protect assets using a trust or other estate planning tools.

However, the benefits you (or an aging parent) receive from Medicaid are not necessarily free. The Medicaid Recovery Program lets Medicaid recoup or get back the money spent on behalf of an aging senior to cover long-term care costs. Federal law requires states to attempt to seek reimbursement from a Medicaid beneficiary’s estate when they die.

How It Works. The Medicaid Estate Recovery Program lets Medicaid seek recompense for a variety of costs, including:

  • Nursing home-related expenses or other long-term care facility stays
  • Home- and community-based services
  • Medical services from a hospital (when the recipient is a long-term care patient); and
  • Prescription drug services for long-term care recipients.

If you (or an aging parent) die after receiving long-term care or other benefits through Medicaid, the recovery program allows Medicaid to pursue any eligible assets held by your estate. Exactly what that includes depends on your state, but generally any assets that would be subject to the probate process after you pass away are fair game.

That may include bank accounts you own, your home or other real estate and vehicles or other real property. Each state makes its own rules. Medicaid can’t take someone’s home or assets before they pass away, but it’s possible for a lien to be placed upon the property.

What Medicaid Estate Recovery Means for Heirs. The biggest thing about the Medicaid estate recovery for heirs of Medicaid recipients is that they might inherit a reduced estate. Medicaid estate recovery rules also exclude you personally from paying for your parents’ long-term care costs. However, filial responsibility laws don’t. It is rare, but the laws of some states let healthcare providers sue the children of long-term care recipients to recover nursing care costs.

How to Avoid Medicaid Estate Recovery. Strategic planning with the help of an elder law attorney can help you or your family avoid financial impacts from Medicaid estate recovery. You should think about buying long-term care insurance for yourself. A long-term care insurance policy can pay for the costs of nursing home care, so you can avoid the need for Medicaid altogether.

Another way to avoid Medicaid estate recovery is to remove assets from the probate process. For example, married couples can do this by making certain that assets are jointly owned with right of survivorship or using assets to purchase an annuity to transfer benefits to the surviving spouse when the other spouse passes away. You should know which assets are and are not subject to probate in your state and whether your state allows for an expanded definition of recoverable assets for Medicaid. Speak with an experienced elder law lawyer for assistance.

Medicaid estate recovery may not be something you have to concern yourself with, if your aging parents leave little or no assets in their estate. However, you should still be aware of it, if you expect to inherit assets from your parents when they die.

Reference: AOL (Feb. 5, 2021) “What Is Medicaid Estate Recovery?”

Can Mom Live in the Backyard?

When one Georgia senior thought about moving closer to her daughter in an Atlanta suburb, she realized she couldn’t afford to buy a home.

Therefore, her daughter researched building a cottage in her own backyard. This fall, they made a deposit on a Craftsman-style design by a local architect who will manage the project from permits to completion. The 429-square-foot home will have one bedroom and bathroom, a galley kitchen and living area and a covered porch.

Kiplinger’s recent article entitled “A Retirement Home Is a Tiny House in the Kids’ Backyard” reports that driven by an aging population and a scarcity of affordable housing, accessory dwelling units (ADUs) are a new trend in multigenerational living. These units are also known as in-law suites, garage apartments, carriage houses, casitas and “granny flats.” Freddie Mac found the share of for-sale listings with an ADU rose 8.6% year-over-year since 2009.

Homes such as these can be created by finishing a basement or attic, converting a garage, reconfiguring unused space, adding on, custom-building a detached unit, or installing a prefab. This unit can also be a source of rental income. A homeowner could also use it to house a parent, child or caregiver; downsize into it themselves to rent the main house; or make it into an office or guest quarters.

Converting existing space is less expensive than building a detached unit. A prefab ADU is cheaper and quicker to install than one built on site. However, a custom project allows you to include aging-in-place features, like a step-free entry, wider doorways and a handicapped accessible shower.

An ADU also allows seniors some privacy, so they’ll feel at home, rather than a visitor or intruder. You might add a private entrance and soundproofing to the shared walls of an in-law suite. Sitting areas indoors and outdoors will let you or a parent enjoy solitude, entertain friends without asking for permission and avoid feeling locked in.

Prior to using your nest egg to create an ADU on a child’s property, think about the way in which you’ll pay for the care you will inevitably need someday. You can’t sell the ADU to raise funds and renting it out after you’ve moved elsewhere is unlikely to cover the cost of your care.

In addition, note that if a parent gives a child money to build an ADU within the look-back period when applying for Medicaid, they may be penalized with delayed coverage.

Reference: Kiplinger (Dec. 31, 2020) “A Retirement Home Is a Tiny House in the Kids’ Backyard”

States with Most Affordable Long-Term Care?

Seven in 10 people 65 and older will require some type of long-term care during their lifetime. This expense will vary based on the patient’s required level of care, care setting and geographic location, says Think Advisor’s recent article entitled “15 Cheapest States for Long-Term Care: 2020.”

A recent study by Genworth found that the cost for facility and in-home care services increased on average from 1.9% to 3.8% per year from 2004 to 2020. That amounts to $797 annually for home care and as much as $2,542 annually for a private room in a nursing home.

At the current rate, some care costs are more than the 1.8% U.S. inflation rate, Genworth said.

These findings were taken from 14,326 surveys completed this summer by long-term care providers at nursing homes, assisted living facilities, adult day health facilities and home care providers. The survey encompassed 435 regions based on the 384 U.S. Metropolitan Statistical Areas, as defined by the U.S. Office of Management and Budget.

In a follow-up study, Genworth also found that these factors are contributing to rate increases for long-term care:

  • Labor shortages
  • Personal protective equipment (PPE) costs
  • Regulatory changes, such as updated CDC guidelines
  • Employee recruitment and retention issues
  • Wages demands; and
  • Supply and demand.

Here are the 15 cheapest states for long-term care, according to Genworth with their average annual cost:

15. Utah: $59,704

14. Kansas: $57,766

13. Iowa: $57,735

12. Kentucky: $57,540

11. South Carolina: $57,413

10. Tennessee: $56,664

9. North Carolina: $56,512

8. Georgia: $53,708

7. Mississippi: $52,461

6. Arkansas: $50,835

5. Oklahoma: $50,641

4. Texas: $48,987

3. Missouri: $48,753

2. Alabama: $48,240

1. Louisiana: $44,811

Reference: Think Advisor (Dec. 14, 2020) “15 Cheapest States for Long-Term Care: 2020”

What Did the Supreme Court Say about Medicaid Work Requirements?

The Trump administration had asked the Supreme Court in July to reinstate its historic approvals of state work requirements waivers. It contends that these rules may assist certain beneficiaries in transitioning to private policies and may result in improved health and to help states conserve financial resources to provide coverage to others in need.

MSN’s article entitled “Supreme Court agrees to consider Medicaid work requirements” reports that lower courts have struck down the Department of Health and Human Services’ approvals, holding that Medicaid’s primary purpose is to provide health care coverage.

The National Health Law Program, one of the consumer advocacy groups that brought the original lawsuits, said it thinks it will win at the Supreme Court.

“HHS’s action was properly vacated because Secretary [Alex] Azar failed to account for the significant loss in health coverage that these approvals would produce,” said Jane Perkins, legal director at the National Health Law Program. “Tens of thousands of people would lose their Medicaid coverage and become uninsured.”

The Supreme Court’s decision to take up the cases follows a panel of federal appellate judges that struck down the Trump administration’s approval of work requirements in Arkansas in February. The unanimous decision, written by Judge David Sentelle, a Reagan appointee, affirmed a district court ruling that found the administration had failed to analyze whether these programs would “promote the primary objective of Medicaid — to furnish medical assistance.”

New Hampshire stopped its roll-out of work requirements last year after the same district judge, James Boasberg in DC, set aside the administration’s approval in that state.

In an unprecedented step two years ago, the Trump administration started granting state requests to mandate that certain Medicaid beneficiaries work to receive benefits. Republicans have long wanted to have that requirement with Medicaid, which insures more than 75 million low-income Americans.

There were 12 states that received waivers, although four were set aside in court, according to the Kaiser Family Foundation. Another seven state requests are awaiting federal approval. Work requirements are not in effect anywhere, after states stopped their efforts because of the legal rulings and the pandemic.

In Arkansas, more than 18,000 people lost coverage in 2018, before the court intervened. Judge Boasberg had also canceled Kentucky’s approval. That move blocked work requirements from being implemented in the state. However, Kentucky withdrew its waiver request after a Democratic governor won election in 2019 and dismissed its appeal.

The judge blocked work requirements in Michigan earlier this year.

Reference: MSN (Dec. 5, 2020) “Supreme Court agrees to consider Medicaid work requirements”