When someone enters a nursing facility for long term placement, there are several ways the Chronic Medicaid program can treat the primary residence. Usually the primary residence is a “countable asset” for the Medicaid applicant and needs to be sold. However, there are some exempt transfer and planning techniques that can preserve the primary residence.
Chronic Medicaid covers someone’s stay in a nursing facility. There are certain income and asset limits for someone applying for Medicaid. The Medicaid applicant cannot have more than $15,750.00 in liquid assets (not including retirement assets), an irrevocable pre-paid funeral arrangement and a car. In order to apply for Chronic Medicaid, five years of financial statements must be provided to the local Department of Social Services to verify eligibility. To the extent that the applicant transferred or gifted any monies (or real property) out of his or her name within the preceding 5-year period, a penalty is assessed. If the primary residence was transferred out of the applicant’s name within the 5-year period, the transfer may make the applicant ineligible for a certain period of time. The following transfers of the residence would NOT result in a penalty:
- Transfer to a spouse
- Transfer to a disabled child (must prove disability and provide birth certificate)
- Transfer to a caretaker child living with the applicant for at least two year immediately prior to institutionalization (must prove residence and provide birth certificate)
- Transfer to a sibling with an equity interest
Outside of the above exceptions, the real property cannot be transferred, and additional planning will be needed. For example, if someone needs nursing home care but intends to go home after a few months, the application for Medicaid should specify an “intent to return home.” This means that the applicant needs to rely on Chronic Medicaid for a short-term basis and then plans to go home. Typically, Medicaid will allow the primary residence to continue to be exempt for up to 6 months. If the applicant returns home, there is no lien placed on the real property. If the applicant dies in the nursing home, there will be a lien placed on the real property for the amount paid on behalf of Medicaid. If the applicant exceeds the 6-month period, Medicaid will then count the house as a resource, and it will need to be liquidated to contribute to the cost of care. If the house is sold, the proceeds will need to be paid directly to the Medicaid applicant. Last minute planning can be done to save about half of the proceeds.
In order to preserve your house and ensure that it is protected in the future, you need to consider now. If proper planning is done before to the 5 year lookback, the primary residence (and potentially additional assets) can be protected and you will not need to be exhausted before relying on Medicaid.