Take Simple Steps Early to Protect Your Most Important Asset: The Family Home

On August 1, 2016, Ohio changed its Medicaid regulations regarding the treatment of the home. Federal and State Medicaid laws recognize that the family home is often times the largest asset of an individual, and Medicaid rules account for the reality that the family home is critical to the well-being of a spouse, a child, or other family members. Still, the changes in the law make protection of the house even more difficult and cumbersome. Now more than ever, early planning involving the relatively simple act of transferring the home into an irrevocable trust can ensure that the home will remain in the family for generations, regardless of the need for long-term care.

Medicaid defines the “Home” as any real property in which an individual has an ownership interest and is the individual’s principal place of residence. A “principal place of residence” is the home to which a person would intend to return if they were absent, like in the case of a stay in a rehab facility or a nursing home.

Generally, the family home that is considered the principal place of residence by an individual or a married couple is an excluded resource, regardless of value. However, the new rules state that the home is no longer considered to be the principal place of residence and will be countable if the individual does not intend to return home. However, the rule states that a “temporary” absence from the home does not affect the exclusion of the home as long as the individual signs a statement of his or her intentions to return home, and has not established permanent residence elsewhere.

This provision has caused considerable confusion and concern amongst elder law practitioners and our clients. When Mom or Dad enters a nursing home and there is no chance that the individual can return home, does the exclusion of the home still stand? Because “intent” is in the mind of the individual, can a power of attorney or guardian express “intent” of another? Would any person “intend” to remain living in a nursing facility if they were medically capable of returning home?

If an individual is married, the home remains excluded as long as a spouse or dependent relative of the individual continues to live in the home. But even if one navigates this maze of irrational requirements and formulation of “intent,” an excluded home is not fully out of the grasp of Medicaid.

For a single Medicaid recipient with an excluded home, who pays for the property taxes, maintenance, and utilities of the excluded home while the owner is in the nursing facility? Since all of the Medicaid recipient’s income (less $50) must be paid to the facility as the individual’s “patient liability,” and their assets must be below $2000, there will be no ability to maintain the home.

Further, Medicaid Estate Recovery provides a framework for the State of Ohio to recoup expenses paid on behalf of a Medicaid recipient, and most often this means having a claim against the home that was excluded while the recipient was alive. For example, if Dad is in a nursing home, signs the requisite “letter of intent to return home” and the home is excluded, obtains Medicaid benefits for two years and passes away, Ohio Estate Recovery can levy a lien on the home for the amount paid through Medicaid, even if it passes to surviving children outside of probate.

While these rules may seem daunting and unintelligible, they are not a barrier to Medicaid, but yet another obstacle to Medicaid eligibility. Why not avoid the obstacle entirely?

Most are aware that Medicaid imposes a prohibition on the transfer of assets within five years of applying for benefits, i.e. the “Five-Year Lookback.” Early planning – perhaps done at the time a couple decides to take their Social Security Retirement – can completely avoid the need to even consider the haze of regulations I’ve described above. Transferring the family home to an irrevocable family trust, while retaining a right to reside in that home, can save the home for the next generation, avoid any discussion of the home should Medicaid become necessary, avoid probate, and remove the specter of Medicaid Estate Recovery – all without any significant change in lifestyle, expenses, or liabilities.

While the Medicaid rules are ever-changing and outcomes are ambiguous, if not completely uncertain, early planning using irrevocable trusts, as part of any retirement plan, can safeguard the family home and hedge against what Ohio Supreme Court Justice William O’Neill called the “impenetrable fog” of Medicaid.

Posted in Articles: Elders and Their Caregivers.