The state never directly "takes" anyone's home. However, the family home may need to be sold to settle long-term care debts after the homeowner's death. Under federal law, the state must attempt to recover the benefits paid to a Medicaid recipient from their estate after the recipient's death. Unless you have done asset preservation planning with a Medicaid planning attorney, your house could be sold or subject to a lien and not pass to your heirs as intended.
Isn't My Primary Residence Exempt From Medicaid?
When a New York resident applies for Medicaid, they cannot have more than $16,000 in available resources. Their primary residence is excluded from this total as long as the home's value is less than the equity limit (currently $906,000). This way, the Medicaid recipient could receive home care, return home after long-term care, or leave the home to a co-owning spouse if they pass away in care.
Unfortunately, the applicant's primary residence is not completely protected from being used to pay for care. For example, the applicant's home is only exempt as long as:
- The house continues to be the applicant's primary residence. Medicaid could impose a lien during the recipient's lifetime if the recipient is considered "permanently absent" from the home. A long-term stay in a nursing home could be regarded as "residing" in a nursing home, making the home an available asset. If the "permanently absent" individual returns home, the Medicaid lien will be dissolved.
- The house is not sold during the recipient's lifetime. If the home is sold with a Medicaid lien in place while the recipient is living, the recipient will become ineligible for benefits due to the increased resources from the sale. The recipient may even have to pay back the state for the coverage previously provided.
- The house is co-owned between an applicant and their spouse. Medicaid can only seek recovery using property held in the deceased recipient's name alone. Any assets the recipient held jointly with the right of survivorship or in which the recipient retained a life estate are not recoverable.
- The surviving spouse is still alive and resides in the home. The exception to the above rule is that the state can seek reimbursement from a claimant once the surviving spouse passes away.
- A minor or disabled child or a sibling with an equity interest lives in the home. The state cannot impose a lien against the Medicaid recipient's estate if a disabled or blind child, a child under age 21, or a sibling with an equity interest is living in the house.
- A relative who qualifies for hardship exemption lives in the home. Medicaid may also be unable to recover the home if the recipient's children or relatives qualify for an undue hardship waiver. In this case, the relative must live in the house, provide care for the Medicaid recipient before they enter the nursing home, and have no other permanent residence.
What Happens to the Home When the Medicaid Recipient Dies?
Medicaid must seek to recover benefits paid for nursing facility services, home and community-based services, and hospital costs for any recipient over age 55. The most common way to recoup these costs is to place a lien on the home during the recipient's estate administration. If the home is in the recipient's name only, the family may be forced to sell the house to release the lien, sell off other valuable assets to repay care costs, or both.
Is There a Way to Preserve the Family Home Without Risking Medicaid Benefits?
An irrevocable trust is one of the most popular planning tools used to protect the home while keeping Medicaid eligibility open in the future. A Medicaid trust, also called an asset protection trust, transfers your home and other property out of your name and holds it until your death. Since assets in trust pass outside of probate and are no longer technically owned by you, Medicaid cannot recover them. Anything held in the trust is overseen by the trustee and passes to your beneficiaries according to your wishes.
Early Medicaid Planning Can Save Money and Heartache
You need to act quickly if you want to protect your hard-earned assets from reclamation by the state. If you don't title your assets appropriately, transfer them into the trust as soon as possible, and create clear directions for your trustees, you may be putting everything you built in your life at risk.
The elder law attorneys at Landskind and Ricaforte Law Group, P.C. can determine the best way to preserve your benefits and pass your property down to your heirs. Contact us today through our online form to get started or order our free guide, Estate and Medicaid Planning in New York: What Everyone Needs to Know.
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