Protect your family home if you need a nursing home

Supreme Court of Ohio Decides: Home Titled in Revocable Trust is Not an Exempt Asset for Medicaid

Recently, the Supreme Court of Ohio ruled that a home that is titled in a couple’s revocable living trust after one spouse enters a nursing home cannot be transferred to the spouse that remains in the community and be an exempt asset for Medicaid purposes. The Court stated, “We agree with the state that during the period between an application for Medicaid benefits and the notice of Medicaid approval… the community spouse must make any amount above his or her CSRA available to the institutionalized spouse.”

Marcella and Raymond Atkinson put their house in a revocable trust in 2000, naming themselves as trustees. In April of 2011, Marcella went into a nursing home. Because the house was not in their own names, but in the names of the trust, the Medicaid agency refused to consider the home an exempt asset, as would have been determined if there was not trust in place. Because of that, their countable resources that the couple was expected to use for Raymond and to pay for Marcella’s care included the value of their home. In June of 2011, the couple applied for Medicaid. Two months later, the home was transferred out of the trust to Marcella’s name and then from Marcella to Raymond. The County Department of Job & Family Services found that the transfer of the home out of the trust into Raymond’s name was an improper transfer and refused to pay for nursing home benefits for eight months.

The federal court in Hughes v. McCarthy, 734 F.3d 473, (6th Cir. 2013) held that the Medicaid laws allow the spouse in the nursing home to transfer unlimited assets to the spouse living at home between the date the spouse enters the nursing home and the date that Medicaid eligibility is granted. The Supreme Court of Ohio, contrary to the United States Court of Appeals for the Sixth Circuit in Hughes v. McCarthy, stated that transfers between spouses are not unlimited after one spouse enters a nursing facility, but before Medicaid eligibility. The Court ruled that no assets over the “Community Spouse Resource Allowance” (the amount the spouse living at home is allowed to keep) may be transferred to the community spouse without the assessment of a penalty.

Justice Kennedy wrote the opinion for the Court, with Justices Pfeifer, O’Donnell, and French concurring.

Chief Justice O’Connor, Justice Lanzinger, and Justice O’Neill dissented. Justice O’Neill wrote: “This case clearly demonstrates the impenetrable fog that almost all senior citizens venture into when they attempt to protect their worldly savings from the financial disaster known as assisted living.” Near the end of his dissent, he opined, “It is clear that the law treats the marital home very carefully to prevent spousal impoverishment at the end of life. And that is the public policy we should be embracing.” Unfortunately for thousands of Ohioans who have engaged in common estate planning with a revocable trust, this decision and the Department of Medicaid’s interpretation of the Medicaid Act will force healthy spouses to liquidate their own homes to pay for their spouse’s care in an institution before Medicaid will begin to pay.

If your home is titled to your revocable trust, you should speak with your attorney about transferring title back into your names with a transfer-on-death designation to the trust. Otherwise, an unexpected nursing home stay could mean that your family home will not be considered an exempt asset for Medicaid and must be considered as a resource available to spend on nursing home bills.

You can find the Opinion here.

Posted in Blog, Disabilities, Estate Planning.