The high cost of nursing home coverage has forced thousands of families to exhaust their savings trying to pay for long-term care.
When the money is gone, you may however be able to qualify for Medicaid benefits to keep you or your loved one from becoming homeless. The catch: Medicaid officials may move to seize your home after your death to pay the tab.
The Medicaid estate recovery program allows state officials to place liens on the assets of Medicaid benefit recipients to repay the taxpayers for the benefits provided on their behalf. If you are a homeowner and you go on Medicaid, this means that the state Medicaid program will put a lien on your home.
When you and your spouse both pass away, your heirs will have to repay the money owed to satisfy the lien before they can take possession of an inherited property. They could also sell the home, and Medicaid would be repaid with any available proceeds from the sale of the home before heirs can receive it.
You own a home worth $300,000 outright. You develop Alzheimer’s, resulting in the need for several years’ care in an assisted living or nursing facility. The cost forces you to deplete your savings below the poverty level in your state (typically around $1,700 to $2,000 in total, excluding home equity and a few other exempt assets), allowing you to qualify for Medicaid.
Medicaid pays $200,000 on your behalf in nursing home and other medical benefits before you die, and places a lien on your home.
Your heirs will need to pay off the $200,000 lien before inheriting the property outright, or sell and collect the remaining $100,000.
The Long-Term Care Partnership Program
There are some strategies you can use to protect your home from Medicare estate recovery officials. One option: Purchase a qualified long-term care insurance policy.
This program enables you to protect your personal assets up to an amount covered by your long-term care insurance policy and still allows you to qualify for Medicaid benefits if and when your insurance coverage runs out.
Long term care generally comes with a maximum daily benefit for a period of years. If you own a qualified long-term care insurance policy, you can shield your home for up to the total benefit amount of your policy, under a federal initiative called the Long Term Care Partnership Program.
To qualify, your long-term care insurance policy must offer an inflation protection rider or include it in the base policy. It must also offer some non-forfeiture options that enable you to recover premiums paid if you have to cancel the policy before it pays benefits on your behalf.
Alternatively, you may put your home in an irrevocable trust. This has the effect of getting it out of your estate.
But, the law allows Medicaid recovery officials to “look back” up to five years and claw back assets that have been transferred out of your name, or trigger a Medicaid ineligibility period of up to five years. So speak with a qualified elder law attorney before relying on any strategies involving an irrevocable trust.
For more information about protecting your home and other personal assets from possible estate recovery seizure, call us today, and we can go over your specific situation.