The rules and regulations for Medicaid eligibility are complex. In order to explore all of your options, you should consult an elder law expert in your area.
Question: I have three children. My son has been living with me for the past few years. I have heard that there is no reason for me to engage in any estate planning because if I require nursing home care, all of my assets can be transferred to my son. Is that correct?
Answer: No, that is not correct. When a person in New York applies for Chronic Medicaid to pay for the cost of nursing home care there are certain requirements. The applicant is only permitted to have non-retirement assets in the amount of $14,850.00, retirement assets in any amount so long as the retirement account is set up for a monthly distribution and a pre-paid irrevocable burial. If you own any real property at the time you need nursing home care, the value of the real property will most likely make you ineligible to receive Chronic Medicaid. The general rule is that for each $12,663.00 transferred (within the five years preceding the date of the Medicaid application) a penalty of one month is assessed. There is a provision in the law in New York which provides that a primary residence can be transferred to a “caretaker child” without creating a penalty period. With that said, the “caretaker child” exemption is not a reason to forgo your estate planning.
The Definition of a Caretaker Child
A caretaker child is defined as a child who has resided in the primary residence with the Medicaid applicant for the two years immediately prior to institutionalization and who, during that time has provided some level of care support to the individual who requires nursing home care. It is imperative to understand that if the applicant is going to rely on the caretaker child exemption,
Transferring a Home to a Child Caretaker
Medicaid will scrutinize the transfer and ask for supporting documentation to prove residency for the caretaker child. The transfer to a care taker child is typically only used in crisis planning and is not a planning technique. First, there may be adverse tax consequences when you transfer the real property to the caretaker child. Second, if it is your intention that all of your children share equally at the time of your death, a transfer to one child is considered a completed gift. The caretaker child is under no obligation to share with his siblings. Additionally, the transfer to the caretaker child can only happen immediately prior to your institutionalization. Therefore, if the child is moved out at the time you require nursing home care, the exemption is lost. Finally, if you have any other assets in your name a transfer to your caretaker child is not exempt. The only asset that may be transferred to the caretaker child is the primary residence. Any other transfer to that child would result in a penalty period.