One of the most common concerns of people coming to our office to talk about estate planning and asset protection is protecting their home in the event that long-term care is necessary for themselves or their spouse. Indeed, in the Western New York area it is quite common for a couple’s primary asset to be their home. Often, people have spent decades making improvements and paying off a mortgage in the hope that they will be able live out their lives in their home and, ideally, transfer the home to their children as an inheritance. Not surprisingly then, the fear that the “government will take my home if I require skilled long term care” is at the forefront of their minds when our discussion begins.
To begin, it is important to note that the government does not “take” a person’s home if they require long term care. However, under some circumstances, the Department of Social Services may place a lien against a person’s house if the person requires Medicaid to pay the cost of long term care (the lien will be in the amount of Medicaid benefits paid during that person’s lifetime), which will be collected upon when the house is sold. For example, an unmarried individual is not permitted to own a home and receive institutional skilled care Medicaid. If they apply for Medicaid but their house is titled in their name, Medicaid will require the sale of the property or place a lien on the property. We CAN prevent this from happening.
At PBM, we understand that the vast majority of our clients would much rather stay in their home than enter a nursing home. We have a team of five Medicaid caseworkers and five attorneys who plan and apply for Medicaid-covered services in the home. One of our main goals is to avoid placing a client in a nursing home if that is their desire. Using the right asset protection strategies and legal mechanisms, we are able to qualify our clients for Medicaid to pay for the services, both equipment and home health workers, to make staying at home possible without impoverishing the family. This is known as “Community Medicaid.” Unlike Skilled Nursing Home “Institutional” Medicaid, there is no time limitation on the transfers of assets (even a house!) to another person. This means we may transfer your home to a loved one or trust and apply for Medicaid benefits immediately — with no penalty to you!
Even if you do require institutional care, there are several ways we are able to protect a family’s home in the event that long term care in a facility is required. One of our most frequently used techniques is to take advantage of a “Deed Transfer with Retained Life Use” or “Life Estate Deed.” Essentially, the Life Estate Deed allows a person to change the ownership of their home to another person, while still preserving their own right to the use and live in the property during their lifetime. Since they have lifetime use, any tax exemptions (e.g., STAR or Veterans’) are preserved. However, if the transferor remains off of Medicaid for at least five years after they have transferred ownership to another person, the property is not deemed to be an “available” resource if long term care is needed. The government may not place a lien against the house or force the sale of the house.
Another option is utilization of an Irrevocable Income Only Trust. By transferring real property (and other assets) into the right kind of Trust at least five years before Medicaid is needed, we are able to take the property (and other assets) “off the table” for Medicaid purposes. Unlike the Life Estate Deed, the IIOT may help protect additional assets over and above the home. These assets may include cash, investments, real property in another state, and more. There are many other advantages of using a Trust as part of your estate plan (avoiding probate, preserving privacy, etc.), which we evaluate in each case as well.
Finally, even if the house has not been transferred within five years, there is often a way to protect the home by taking advantage of specific exemptions in the law. For example, if a person is in need of Medicaid to cover the cost of long term care, their home may be transferred to their spouse, a child who has resided with them for two years immediately preceding their need for skilled care, a child under the age of twenty-one years, a child who is blind or disabled, and, in some cases, even a sibling. In other cases we may gift your home as part of a broader gifting strategy when qualifying you for Medicaid.
The bottom line is that, in the majority of cases, we are able to successfully preserve your home for your use and effect the transfer of your home to your loved ones without negatively impacting your ability to receive the care you need.
If you would like more information about estate planning and preserving assets as you grow older, please call us at 716.204.1055. We would be happy to set up a consultation.