MEDICAID AND THE FAMILY HOME (REDUX)
Preserving the family home is one of the biggest concerns of Medicaid applicants and their families. In addition to being the largest single asset for most, it holds deep sentimental value and provides shelter and security to close family members.
To qualify for Medicaid in Ohio, an individual can have no more than $2,000 in countable resources. If property is owned by the Medicaid applicant, his spouse or their revocable trust, Medicaid considers it a resource. The individual’s home is excluded (not countable as a resource) so long as the individual or a recognized dependent resides there.
What classifies as a home?
A person’s home is his principal residence whether it is a house, mobile home, or houseboat. It includes all the land and buildings of the property. If multiple properties are owned, the Medicaid applicant must designate in a signed writing which one is considered “home”.
Excluding the House as a Resource
- The Individual – The home is excluded as a resource so long as the Medicaid applicant resides there receiving services from a home Medicaid program such as PASSPORT. It continues to be excluded if there is a temporary absence such as a hospitalization or nursing home so long as the applicant submits a signed written statement of his intent to return home. It is no longer excluded if the individual moves into another residence such as an assisted living facility or a relative’s home without the intent to return home.
- The Spouse – Even if the applicant is “institutionalized” in a nursing home or an assisted living facility, the home is excluded if the spouse resides there. In these situations, transferring the house into the spouse’s name alone may avoid future problems on the sale of the house or upon death of either spouse. It will also make it easier for the spouse to secure an equity loan or reverse mortgage if needed.
- Dependent Relatives – The house may also be “excluded” for Medicaid purposes if other relatives who are dependent on the applicant reside there. “Relatives” can mean a child, stepchild, grandchild, parent, stepparent, grandparent, aunt, uncle, niece, nephew, brother, sister, stepbrother, stepsister, half-brother, half-sister, cousin or in-law. “Dependent” is not clearly defined. It can include financial, medical, etc. A signed written statement explaining the relationship and the reason for dependency should be submitted.
- Co-Owners – If the property is co-owned by a person it would be excluded as a resource of the Medicaid applicant if it is the principal residence of the co-owner and he would be left homeless if forced to sell.
Transferring the Medicaid Applicant’s Interest in the Home
- Spouse – The Medicaid Applicant may transfer his interest in the home to his spouse. This transfer is exempt (not penalized) so long as the spouse does not later transfer the house for less than fair market value. Once the house is transferred to the spouse, she may want to change her Estate Plan to exclude the Medicaid Applicant. If the home is held jointly and the healthy spouse dies first, the entire value of the house could become countable resources for the ill spouse again. Even with a change, the Medicaid Applicant may still be entitled to a portion of the estate if he survives the spouse.
- Disabled Child – The home may be transferred to a disabled child with no penalty. It will be necessary to document the disability to Medicaid.
- Sibling with an Equity Interest – The home may be transferred to a sibling who holds equity interest without penalty so long as the sibling has resided in the home for at least a year prior to the individual’s nursing home admission.
- Caretaker Child – A caretaker child is one who has resided in the home and cared for the Medicaid Applicant for at least two years. A doctor must certify that without the caretaker, the individual would have required nursing home care two years earlier. Caretaker child transfers are exempt. They should be made as soon as possible and before the Medicaid Applicant’s death.
- Penalized Transfers – If the home is given to someone whose status is not exempt less than 60 months before the Medicaid Application, the transfer may create a penalty preventing the individual from qualifying for Medicaid for some period of time. Situations must be examined individually to determine the length of the penalty, if any.
- Home Equity – High value homes (with equity in excess of $500,000) may be subject to special rules. If necessary, equity may be reduced by taking a loan on the property.
- Income Producing Property – A home that produces income for the owner, such as a duplex, apartment building or farm is also subject to special rules.
- Medicaid Recovery – If the individual who received Medicaid passes away, any interest he holds in the home may be subject to Medicaid Recovery. If dependents reside in the home at the time of his death, Medicaid Recovery may place a lien on the home to be collected when dependents no longer reside there.
- Sale of the Home – The appraised value on the county property tax bill will be considered the “fair market value” of the home unless other evidence in the form of a private appraisal is presented. If the home is sold to a relative or friend for less than the fair market value, Medicaid may consider it a gift. Former rules indicated that 90% of the fair market value would not be considered a gift. The present rules do not indicate how much of a discount would be allowed without being considered a gift. Once sold, the proceeds from the house are considered countable resources and, to the extent they exceed $2,000, will disqualify the individual from Medicaid.