How to Protect your Home from Nursing Home Costs – Part 3: Using Exempt Transfers

This article is the final installment in a series that describes various ways Seniors can protect their homes from loss to the Government Medicaid estate recovery program. Earlier articles on this topic can be found on this blog at the following hyperlinks: 

Part 1: The Home Protection Trust

Part 2: The Life Estate Deed

In this installment, I will discuss the use of Medicaid exempt transfers. 

Federal law requires states to withhold Medicaid payment for nursing home and other long-term care services for individuals who dispose of assets, including their homes, for less than fair market value.  These provisions also apply when transfers were made by the individual’s spouse. As a result, giving your home away can make you ineligible for any assistance from Medicaid.  

However, the law exempts a number of types of transfers from penalty. If the transfer qualifies under one of these exemptions, you can protect your home without losing the ability to qualify for Medicaid benefits when you need long term care.  

Exempt Transfers That Do Not Incur a Penalty 

Some transfers are exempt from penalty. There are general exemptions that apply to any transfer, and other exemptions that apply only to the transfer of a residence. 

General Exemptions from the Transfer Penalties

The transfer of assets without fair consideration will not create a period of ineligibility for Medicaid under any of the following conditions: 

• Intent to Receive Fair Market Value. The Medicaid applicant can show that he or she intended to dispose of the assets at fair market value.

• Purpose Other Than to Obtain Benefits. The Medicaid applicant can show that the assets were transferred exclusively for a purpose other than to qualify for Medicaid.

• To the Spouse. The assets were transferred to the Medicaid applicant’s spouse or to another for the sole benefit of the applicant’s spouse.

• To a Minor or Disabled Child. The assets were transferred to the Medicaid applicant’s child who is under 21 years of age, or to a child of any age who is blind or permanently and totally disabled (based on SSI criteria), or to a trust solely for the benefit of such child.

• To a Trust for a Disabled Person who is under age 65. The assets were transferred to a trust meeting certain criteria which was established solely for the benefit of an individual who is under 65 years of age and who is disabled (based on SSI criteria).

Exemptions Applicable Solely to the Transfer of a Residence

In addition to the general exemptions described above, the law contains a number of other exemptions that apply solely to a transfer of the residence. If the transfer of the residence meets one of the following exemptions, no period of ineligibility is imposed:

• Caregiver Child. The transfer of the home is to the applicant’s child who resided in the property for two years prior to the parent entering a nursing home and who provided care during the two-year period that permitted the parent to stay in the home rather than a nursing home. 

• Sibling with Equity. The transfer is to a sibling who has an equity interest in the home and who lived in the home for at least one year immediately before the applicant entered a nursing home.

Medicaid estate recovery applies to your home and any other assets that you own at the time of your death. Estate recovery no longer applies if you have transferred your home away during your lifetime using one of the above exemptions. As a result, the various transfer exemptions described above provide plenty of opportunity to protect the home from loss to the government’s Medicaid estate recovery program. 

Conclusion and Warnings

In this three part series I have discussed a number of common techniques Seniors use to protect their homes from loss to Medicaid estate recovery at their deaths. My discussion included the use of trusts, life estate deeds and exempt transfers. There are other techniques that I have not discussed that may also be appropriate depending on your circumstances.  

Be careful. Don’t transfer the ownership of your home without getting the best advice possible. There are many issues to consider and traps for the unwary. Be sure to consult an experienced elder law attorney BEFORE you act. Recognize that most lawyers are not experienced in Medicaid and long term care planning. They may be able to prepare a deed for you, but that doesn’t mean they understand the Medicaid consequences. Seek the help of an attorney who is an expert in this area of the law.

If you reside in Pennsylvania, you can consult with the lawyers at my law firm, Marshall, Parker and Weber. Call 1-800-401-4552 to set up a free initial consultation or visit us online at www.paelderlaw.com. If you reside in a state other than Pennsylvania, you can look for a certified elder law attorney in your state at the website of the National Elder Law Foundation. 

 

Further Information

How to Protect your Home from Nursing Home Costs – Part 1: The Home Protection Trust

 

How to Protect Your Home from Nursing Home Costs - Part 2: The Life Estate Deed

 

Medicaid Estate Recovery: A Medicaid Death Tax

 

National Elder Law Foundation (a listing of lawyers who have attained Certified Elder Law Attorney status in each state) 

Marshall, Parker & Weber (the website of my law firm contains many articles on protecting your assets from nursing home and other long term care costs)