For most people, the home is their most important asset, for many reasons, but primarily because it might be their largest valued asset financially and sentimentally. Whether you want the home to stay in the family or want the value of the home to pass on to family, this is a discussion I often have with clients who are contemplating a Medicaid application.
First, it is important to understand how Medicaid treats the home. For a married couple, the home is an exempt asset for the “community spouse”, or the spouse that does not need Medicaid. For a single applicant, the home is an exempt asset while the potential Medicaid recipient is alive. This means you can be on Medicaid and still have the house in your name. However, if you still own the house while on Medicaid, and you pass away, the State of Ohio can put a lien on your home to the amount of Medicaid benefits given to you. Given the high cost of long-term care, this could erase any equity you have in the home. For this reason, I often include the value of the home when contemplating a Medicaid application.
One way you can protect your home is by gifting it to an irrevocable trust. An irrevocable trust cannot be changed by the settlor, the person creating the trust. The irrevocable trust would have a third party (such as a child) as trustee, and their children would be the beneficiaries. You will lose ownership of the house but will retain possession of the house through a lifetime residency agreement. If you gift the house to the irrevocable trust and wait five years before applying for Medicaid, the transfer is not seen by Medicaid and has successfully been protected from the reach of Medicaid.
There are many factors why an irrevocable trust is a good or bad plan. Age, medical conditions, and trustworthy trustees are some important things to consider. Speaking with a qualified elder law attorney will help you determine what will work best for your needs.