How to Protect Your House Before and After Moving to an Assisted Living Facility or Nursing Home
Many people worry that they will have to lose their home and other assets to qualify for Medicaid, known as Medi-Cal in California.
It is not standard procedure for someone to be required to sell their residence in order to qualify for Medi-Cal coverage when they need nursing home care, because it is an exempt asset, its value is not counted in determining eligibility, but it's possible that the state will file a claim against that individual's home after they die.
If an individual uses Medi-Cal to finance nursing home care, the state will likely require that the individual's estate pay back what it can to cover these costs. "Estate recovery" happens when Medi-Cal goes after whatever assets remain in the person’s estate. In most cases that means a personal residence. That is why individuals who are considering entering a nursing home are strongly advised to work with an elder law or estate planning attorney before making any decisions, in order to protect their home and assets. The residence can be protected, particularly in California.
The federal Deficit Reduction Act of 2005 puts a limit on the value of a residence for a single person if it is to be considered exempt. Exempt status can be lost if the equity of the home is less than $500,000 (or $750,000, depending on the state). Regardless of the state, the resident is allowed to hold onto the home without an equity limit if their spouse or some other dependent relative resides there. California is yet to implement the DRA, so there is no limitation on the value of an exempt residence in California.
Some people choose to transfer their home to an adult child or other family member, in an attempt to protect it from Medicaid. Many states impose a Medicaid penalty period; they become ineligible for Medicaid for a set period of time. However, there are times when transferring a home is legal. Again, this is when consulting an elder law or estate attorney is in everyone's best interest. A home may be transferred without a transfer penalty to a spouse or to a child under the age of 21 or an adult child who has a disability, or to a caretaking child, or to a sibling who has resided in the home for a set amount of time prior to the individual's move to a nursing home or other institution and who hold s equity in the home. A home may also be transferred into a trust for the sole benefit of a disabled individual who is below the age 65. Each of these situations has restrictions and caveats, and should be run past an attorney.
Even more can be done in California. A residence can be transferred to any one or to any trust without a penalty period for Medi-Cal eligibility. This is largely because California has implemented neither the DRA nor other relevant provisions of federal Medicaid law.
Simply stated, the residence can be completely protected in California with property tax sensitive planning.
For information about how to protect your estate and assets, contact an elder law or estate planning attorney at Gilfix & La Poll.