One of the most common concerns of our aging clients is the fear of losing their family home if they need full time nursing care. There seems to be an inclination to transfer the family home to someone else, usually a family member, as quickly as possible to keep the home from being sold. This may sound like a smart idea, but it simply doesn’t work in most circumstances.
Losing the family home is a legitimate concern but one that you should not try to address without the assistance of an experienced elder law attorney. Here are a few of the problems you can encounter if you don’t abide by Kansas law and Medicaid rules:
1. Gift Tax Consequences. Unless the appraised value of your family home is $15,000 or less (the 2019 annual gifting allowance), when you transfer your family home to someone else, you will be required to file a gift tax return and may be subject to a gift tax.
2. Medicaid Reimbursement Claim. If you require full time nursing home care and are counting on Medicaid benefits to cover the cost of your care, transferring your residence to someone else shortly before moving to a nursing home facility will likely result in a problem. Medicaid works on the theory that assets (your family home, for example) that otherwise could be used to pay for your care should not be given away within the five year period prior to requesting the government (Medicaid) pay for nursing home benefits. This period is called the five year look-back. Unless the gift recipient fits certain, clearly specified exceptions, the government will assess a penalty period before they will contribute to your nursing home care if you have made a gift within the five year look-back. During the penalty period, you will be required to private pay for the cost of any nursing home care that you receive.
3. Medicaid Fraud. Should you decide to try to “fool” the government by completing an application for Medicaid assistance that contains false or erroneous information, be prepared for serious legal consequences. For example, if you fail to list the family home as one of your assets that was transferred to someone within the five year look-back period, you could be subject to hefty fines and possible jail time for Medicaid fraud.
What are your options if you want to keep your home from being sold to pay for your nursing home care? The following are allowable transfer exceptions to the Medicaid rule for a family home:
• Transfer to a spouse, who continues to live at home. (In some states this will only preserve the house during you and your spouse’s lifetimes. Medicaid may still claim the home after the death of you and your spouse.)
• Transfer to an adult disabled child who needs the home as part of his/her support. Special care should be applied to avoid accidentally disqualifying the disabled child from any government benefits he or she may be receiving.
• Transfer to a caretaker child. If an adult child has lived with you for a period of two or more years to care for you in order to avoid going into a nursing home, the home may be transferred to the caretaker child without Medicaid penalty. This should not be done without consulting with an elder law attorney first as there are certain requirements and paperwork that must be completed and provided to Medicaid to ensure that the transfer does not result in a penalty.
Another option to preserve the family home or real estate is to transfer the property to a Medicaid Asset Protection Trust (MAPT). This transfer moves the home and your other titled assets to a Trustee, who then uses these assets to pay for your living expenses and care, whether at home or in a nursing facility. All financial responsibility for your assets is then handled by the Trustee. The transfer must be made prior to the five year look-back period, to completely preserve your family assets, but even if the transfer was done in less than five years from the date you need nursing home care, you may be able to preserve a majority of your assets.
If you are single and will likely not return home after moving into a Medicaid certified nursing home, you should consider selling your family home. This could include selling the home on contract to a family member, which would allow you to keep it in the family and the family member to pay for the house over time.
No matter where you are at in the long-term care process, there are numerous planning techniques that can be utilized to preserve as many of your assets as possible.
If you and your family have questions about Medicaid planning and real estate transfers, please contact Davis & McCann, P. A., Dodge City, KS. We are members of Wealth Counsel, a national consortium of Estate Planning Attorneys and the National Academy of Elder Law Attorneys (NAELA). We focus our practice on providing clients with the best legal advice on estate planning, Medicaid and Long-term Care Planning, Family Business/Small Business Succession Planning, Probate, Trust Administration, Real Estate Transactions, and related matters.
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