Save Your Home for Your Heirs If You Seek Medicaid Help for LTC
Bob Richards--Marketing and Financial Services
Their home is often the main asset of many seniors. And they want to see it passed on to their children when they die. However, if they cannot afford to pay long-term care insurance (LTC) premiums or are not prepared to privately pay for their long-term care when needed, their house will be in jeopardy.
Medicaid is your only alternative. Medicaid’s LTC benefits are quite comprehensive, but only for some states. You will have to check the benefits offered by your own state.
But you won’t qualify for Medicaid unless you are close to being indigent. If you are not, then Medicaid will seek payment for its services out of your assets. And that includes your home.
So can you give away your assets before applying for Medicaid LTC? Yes and no…
In carrying out their Medicaid program, states can “look back” to find transfers of your assets for 60 months prior to the date the individual is institutionalized. Or, if later, the date he or she applies for Medicaid.
If a transfer of assets for less than fair market value is found, the state must withhold payment for nursing facility care (and certain other long-term care services) for a period of time referred to as the penalty period. The length of the penalty period is determined by dividing the value of the ‘gift portion’ of the transferred asset by the average monthly private-pay rate for nursing facility care in the state.
As an example, a transferred asset worth $90,000, divided by a $3,000 average monthly private-pay rate, results in a 30-month penalty period. And there is no limit to the length of the penalty period.
Thus if it is your intention to transfer your house or anything else as a gift or for less than fair market value to your children, you must do so at least five years-to be safe-before incurring any LTC that you will want Medicaid to pay for. The transfer cannot be conditional or revocable.
Giving your home directly to your children can still leave you vulnerable. You may trust your child to maintain you in ‘what was your home’. But if he (or she) is sued, his assets-including what used to be your house-could be lost.
To protect against this possibility, you can transfer it irrevocably to a trust. This can guarantee your use of the house while you occupy it with your child as the beneficiary.