*Updated August 11, 2020
While the primary residence is exempt from the resource calculation for community-based Medicaid, there are certain precautions that should be taken to ensure that the house will remain protected under all circumstances. Owning a home does not disqualify an applicant from receiving Community Medicaid.
Medicaid is a needs-based benefit that requires the applicant to meet certain asset and income limits. An applicant for community Medicaid is permitted to have liquid non-retirement assets that do not exceed $15,750.00 (2020), retirement assets in any amount (so long as a monthly distribution is being taken) an irrevocable pre-paid funeral and one car. Provided that the Medicaid recipient remains at home receiving services, the home in considered an exempt asset meaning that it cannot be counted towards the resource level as long as its equity value does not exceed $893,000.00 (or a spouse, minor or disabled child is living in the home). This makes sense that the government is encouraging people to age in place to keep down the cost of care.
Vulnerability of the Home When Medicaid Recipient Passes Away
It is imperative to realize that when a Medicaid applicant passes away and the house is owned individually by the recipient, the house must pass through probate before the ownership passes to the intended beneficiaries. Although the house was an exempt asset during the lifetime of the Medicaid recipient, under New York State law, costs of services provided under Medicaid to an individual over the age of 55 are subject to estate recovery at the time of the Medicaid recipient’s death.
For the purpose of Medicaid estate recovery, an estate is defined as the decedent’s real and personal property and all other assets passing under the terms of a valid will or intestacy. Because the house would pass through the estate there would be an opportunity to recover against the value of the house.
How to Protect the Home
In order to prevent estate recovery, the Medicaid recipient should engage in proper estate planning during his or her life. At the time of the Medicaid recipient’s death, if the house is owned by a trust, the house can be transferred to the intended beneficiaries without the need of probate; thereby, avoiding Medicaid having an opportunity to recover against the house. The trust may be irrevocable or revocable. If the house is transferred to an Irrevocable Trust, the five-year look back will begin to run in the event that the Medicaid recipient might need nursing home care in the future.
**Note that the Medicaid laws regarding Community Medicaid are changing on October 1, 2020. Although an applicant’s house is still an excludable resource for eligibility, the addition of a 30 month look back for all transfers directly affects how we protect the home. No interim rules have been issued as to whether the transfer of the house into an irrevocable trust will be subject to a penalty. Until the end of the year, we are transferring homes into irrevocable trusts to avoid the consequences of the new transfer penalties. Read more about the new legislation here.
To best understand your options, you should consult with an Elder attorney in your area.