A client recently brought me an old newspaper clipping of one of my columns saved by her father. It dealt with the age old question of what happens to the family home when a parent or spouse goes on Medicaid. I was flattered and appreciative that he kept the column and then realized that the answer to the question, so apparent to me, is not necessarily apparent to others facing this question for the first time. Just what does happen to the house?
1. The government does not just take the house. Let’s dispose of the first rumor which is one I think most have already gotten beyond. The government does not take a house when a nursing home resident is on Medicaid. The nursing home does not take the house either. Neither of them are in the business of building real estate portfolios. Nursing home bills are sent usually monthly and payment is expected from the resident’s funds. When the time arrives that the person should qualify on the assets and medically for Medicaid and an appropriate application with information and documentation submitted provided that there are no stumbling blocks such as impermissible gifting, then Medicaid can be granted and it can be granted while the nursing home resident still owns a home provided the value does not exceed a certain valuation. Owning a home while on Medicaid, however, is not an ideal situation. Transferring the residence to the children is also not a good idea in the vast majority of cases. There are a few exceptions such as where a child lived with a parent for over two years and cared for the parent, known as the “caregiver child” exception or where an adult child is disabled. But, generally speaking, transferring a house to children without consideration and in anticipation that their parent will go on Medicaid will result in penalties that could last for years and prevent the very thing – the granting of Medicaid – that the children want to accomplish.
2. If the government does not take the house, then why are there claims against the house later? Suppose your parent is a widow or widower, is on Medicaid, and still owns a house. Although ownership of the house may be permitted during lifetime on the theory that your parent might return home, when your mother or father dies, then the government has a claim against your parent’s probate estate for the cost of care. The government is a creditor of the estate.
3. Do the same rules apply if I am a spouse and my husband or wife goes to a nursing home? The rules are different for spouses. The house can be transferred completely into the name of the spouse at home without any Medicaid penalty. Also the house is protected from any government claim both during the life of the spouse receiving Medicaid and during the life of the spouse at home.
4. What happens when my spouse dies if he or she was receiving Medicaid? If your spouse who is in a nursing home on Medicaid dies before you, there is no government claim. That would be both in the situation where you both continued to own the house as tenants by the entireties and where the house was transferred into your name alone. One reason for transferring the house into the name of the spouse at home is a concern that the spouse at home could die first.
5. What if I die first while my spouse is still receiving Medicaid in a nursing home? If you die first and your spouse is on Medicaid in a nursing home, then it depends. If the house was transferred into your name alone, then the government would generally be entitled at least to what is known as the “spousal elective share,” basically one-third of your estate regardless what your Will says. If the house still was jointly titled, the government can claim as creditor of your spouse’s estate after her or his death. See above at #2.
6. Is there nothing that can be done to protect the house if it is owned by my parent who is a widow or widower? This is not a short answer. You might get clues if you read some of my earlier columns.
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