Protecting the Home – Part 2

A continuation of last week’s topic concerns protecting the home when applying for Medicaid.  I explained that John’s daughter, Amy should not have to sell her Dad’s home and spend down the proceeds before qualifying for Medicaid if Amy is living in the home and she intends to bring him back home from the nursing facility where he currently is staying after she graduates from college.

But, I also said that because John and Amy did not seek advice before filing the application they missed an opportunity to protect the home completely.  Even if Amy does not sell the home now, it must remain in John’s name.  If he ever does sell it he will have to spend down the entire proceeds before requalifying for Medicaid.  If he doesn’t sell it and owns the home when he dies, Medicaid will assert a lien on the home to secure repayment of all the benefits it paid out on his behalf during his life.

What they missed out on was the option to transfer the home to Amy under a Medicaid exception that does not cause a Medicaid penalty – an ineligibility period – to result from the transfer.  Medicaid regulations provide that a transfer of the home to a child under the age of 21 is exempt from Medicaid’s transfer penalty rules.  In other words, John could have transferred the home to Amy outright and it would not have affected his Medicaid eligibility or been subject to a Medicaid lien after his death.  Once she turned 21 earlier this year that option was no longer available.

John and Amy’s case is just one example of what I often tell people.  You can talk to a lot of different people who have had some experience with Medicaid.  Some may tell you it was easy getting their application approved.  No two applications and fact patterns, however, are identical.  One of the dangers in doing it yourself is that you don’t know what you don’t know.  You may get incorrect advice or information but how would you know it is incorrect?

In John and Amy’s case they were able to avoid the mistake of acting on incorrect information, however, they could have saved a $400,000 asset entirely by seeking the right advice at the right time.