My colleague, Haans Mulder, and I had the recent pleasure of speaking to a group of people about the nuances of planning to keep a home while a loved one receives Medicaid benefits. While the focus is often on preservation of the home sometimes it doesn’t make sense to continue paying for taxes, insurance, maintenance, or even condominium fees. If the homeowner is already receiving Medicaid benefits then the decision to sell the home adds further complication.
First, the home would have to be sold for fair market value to avoid a future divestment penalty from being assessed by the Michigan Department of Health and Human Services (DHHS). Once the closing occurs, the proceeds should be deposited into an account owned by the Medicaid recipient. Assuming the recipient is single, they would no longer be eligible for benefits because the sale proceeds would have increased their countable assets to over $2,000. It is the recipient’s duty to report this change to the DHHS.
The Medicaid recipient has 10 days from the date of receiving the sale proceeds to do so. The DHHS will then issue a notice denying benefits. Although, this means that the person will have to pay out-of-pocket for their care, it may allow for some additional planning. For example, it may be a great time to purchase an irrevocable prepaid funeral contract if that was not done as part of the initial Medicaid application. It would also be appropriate to pay any bills that were not paid because of the lack of money to do so. After these types of expenses are paid, either the money should be spent-down on that individual’s care needs or other planning techniques should be considered.
For a single person in a nursing home, if the countable assets exceed $2,000, a half-loaf process is available to preserve some assets for the person’s intended beneficiaries. The remaining assets are used to privately pay the nursing home. Using a portion of the assets to pay the nursing home is meant to satisfy the penalty assessed by the DHHS for making a gift. But, the primary benefit of the planning is that some portion of the excess assets are gifted which provides some inheritance rather than none. This means that only about ½ of the countable assets have to be used to pay for the nursing home care. It is important to note that if an agent under a general durable power of attorney is engaging in this planning that this document must contain certain provisions allowing the agent to make gifts and handle the other details of this planning.
The planning options for a couple who sell a home where one spouse is in a nursing home are very different than the planning described above for a single person. Also, a Medicaid recipient in an assisted living community that sells a home while receiving benefits through the MI Choice Waiver program will have some additional factors to consider.
When it doesn’t make sense to keep the home be sure to get appropriate advice about your options. Please note that the half-loaf process described in this article has been stated in simple terms. The details of the planning should be discussed with an elder law attorney.