For many seniors, owning a home is synonymous with the American Dream. The goal is to stay in the family home, and then pass it on to the next generation. The nightmare that plagues many older Americans is being forced to sell their homes to pay the expenses of long term care. For this reason, many seniors want to transfer their homes to their child or children especially if the child resides with them.
In most instances, transferring a home to a child or other family member may cause a penalty period in which Medicaid is not available to pay for care. In certain circumstances, the transfer can be considered exempt and the penalty can be avoided. One such exempt transfer is to a “Caretaker Child”.
The “Caretaker Child” is one who resides in the parent’s home providing care for at least two years prior to the parent moving into a long term care facility such as a nursing home or applying for assistance from a Home and Community Based Services (HCBS) waiver program, such as PASSPORT. Simply residing in the house is not enough. The Caretaker Child must provide needed care which otherwise would have required the parent to go to a nursing home or apply for a HCBS Medicaid program.
The Medicaid rules are quite specific as to what a Caretaker Child must do in order for the exemption to apply.
- The Caretaker must be a natural or adopted child.
- The child must actually reside in the parents’ home with them.
- The parent must require help with activities of daily living or instrumental activities of daily living (See lists) to such an extent that he or she would require nursing home care if the child were not there to help
- The child must continuously live in the home providing the care for at least two years immediately prior to the parent going into a nursing home or applying for HCBS Medicaid help.
- The child must continue to live in the home until the transfer is made, even if the parent is placed in the nursing home or receiving HCBS Medicaid.
To prove herself, the Caretaker Child, must provide Medicaid with documentation that she meets the definition. For the transfer of the home to be exempt from penalty, Medicaid will require written proof from the parent’s doctor and the child providing care. Medicaid will scrutinize this documentation to determine if the exemption applies. It is the family’s responsibility to keep careful records as they go.
If you hope to protect the family home via a Caretaker Child exempt transfer, it is important to begin documenting your status as early as possible.
- Be sure that you have a proper power of attorney in place in case you become too ill to sign the deed when the time comes
- Talk to your doctor about the kind of care required and your child’s role in providing that care.
- List the activities and actions that your child performs to keep you safe at home.
- Your child should keep a journal or calendar of your activities, doctor’s visits, hospital stays and changes in your condition.
- Keep a checklist of care and services provided on a regular basis.
Contemporaneous records can help you remember all your child has done and to assemble necessary proof when needed. That documentation must show the date that the child moved into the home, the parent’s condition that required the care to stay out of the nursing home, the extent and type of care that was provided, the amount of time the child devoted to the care, and other activities such as school and work, that the child was involved in during that period.
The Caretaker Child exclusion cannot be used for early planning. It is a crisis exemption as the status of Caretaker Child can only be determined at the time the parent enters the nursing home or applies for a HCBS Waiver Program. If the child moves out before the transfer is made, the exemption is lost.
There may be adverse consequences of transferring the home that should be considered.
- The child may not qualify for certain real estate tax exemptions that the parent had
- Transferring to the Caretaker Child may defeat the parent’s intention to divide his property equally among all of his children.
- Transferring the house during the parent’s lifetime may create a capital gains tax problem when the child sells the house.
- For example, if the parent purchased the house in 1950 for $30,000 and the house is now worth $230,000, the capital gain would be $200,000. A lifetime transfer gives the child the same basis ($30,000) as the parent. If the child received the house at the parents death, the child would get a “step up” in the basis to $230,000 and there would be no capital gains when the house is sold.
The laws surrounding Medicaid and the transfer of the house are complicated and constantly changing. Seek the help of a qualified elder law and estate planning attorney who can analyze your unique situation and create a plan most appropriate for you.
Activities of Daily Living (ADL)
ADL’s are self-care activities that everyone must perform to lead a normal, independent life.
Eating: Do you have the physical ability to swallow or chew food? Do you have trouble moving food from the plate to the mouth?
Bathing & Hygiene: Can you bathe yourself and brush your own teeth?
Dressing: Are you physically able to dress yourself and make appropriate clothing decisions?
Grooming: Can you comb your hair and trim your toenails and fingernails? Can you properly apply makeup or shave yourself?
Mobility: Can you move around without the assistance of a walker, wheelchair, or cane? Can you successfully get out of bed, get onto and off of the toilet, go up and down the stairs and sit or rise from the couch or other furniture on your own?
Toileting & Continence: Are you able to use the restroom without any assistance or handle your own ostomy bag?
Instrumental Activities of Daily Living (IADL)
IADL’s are activities a person must perform in order to live independently in a community setting during the course of a normal day.
Some examples of IADL’s include:
- Washing laundry
- Managing medications
- Using a telephone
- Managing money
- Handling mail