Real Estate and Medicaid (Part 3)
In this third post of three, I discuss the impediment to qualifying for Medicaid when an applicant owns two homes. To review, only the primary residence is an exempt asset as long as the applicant or spouse is living in it. The second home is countable towards Medicaid’s asset limit. Selling the home and spending down the proceeds is obviously one option, however, if the desire is to keep that home in the family there are other options.
Last week I explained that the equity from the second home can be converted to cash by borrowing against it and taking a mortgage. The cash then must be spent down. In the case of a married couple, the non-Medicaid spouse can then purchase a Medicaid compliant annuity which converts this cash to income under Medicaid rules. The spouse then receives monthly payments from the annuity that can be used to make the mortgage payments. In the case of a single applicant it is a bit more complicated but some part of the cash would be transferred and the rest used to purchase the annuity. In that case, the transferred cash would be used to pay the mortgage.
This week I discuss a second option. This solution involves selling the second home or a part of the second home to a family member. If the entire home is sold, the Medicaid applicant then takes the cash and purchases a Medicaid annuity as described above.
If the family member cannot afford or does not wish to purchase 100% of the home, a purchase of less than 100% would also work. That’s because the applicant would then own a part of the home with one or more co-owners who do not wish to sell. The home becomes an inaccessible asset and would not be countable for Medicaid eligibility purposes.
While the State can and will place a lien on that home (or the primary residence for that matter) after the Medicaid recipient and any spouse die so it can recoup benefits it paid out, the amount the State is paying for care (and which must be reimbursed) is much less than the private pay rate that would need to be paid otherwise. In the end, the home can be kept in the family and the amount spent on care at the Medicaid reimbursement rate is much less than the private pay rate.