Can Proceeds of Nursing Home Resident’s Home Sale be Protected from Medicaid Estate Recovery?
In Texas, is there a way to shelter cash from the sale of non-exempt estate assets to avoid MERP, while the recipient is in the nursing home using the Medicaid benefit? As an example, could the Medicaid recipient transfer the cash from sale of property into an interest in an LLC, thereby moving out of cash (a disqualifier for Medicaid) and out of probate (language in operating agreement designed to transfer member interests immediately upon death of member)? The goal is to sell enough assets to remove the elder from the nursing facility and place into private care and remove them from Medicaid. In the meantime, the one asset sale is not enough to place the elder into private care. Hence the idea of transferring the cash from sale of the estate property into an LLC until enough is accrued to afford private care. We understand cash to be a problem with Medicaid.
I can’t tell you about Texas in particular, but I’m not sure why what you propose would work differently there from any other state. The first part of your proposal will not work, but the second part will. As soon as the asset is sold, the Medicaid recipient will have cash and will be ineligible for Medicaid. Exchanging the cash for an interest in an LLC will not help since the LLC interest will still be countable and put the recipient over the Medicaid asset limit. If the LLC were written in a way that her interest were inaccessible and non-countable for Medicaid, it would be treated as an nonqualifying transfer of assets and any such transfer would cause her to be ineligible for benefits for up to five years following the transfer.
However, if the Medicaid recipient leaves the nursing facility and returns home, then she will no longer need current Medicaid eligibility. She could then place the proceeds of sale in a form of ownership that avoids estate recovery. This could be an LLC written as you suggest or a revocable trust.
In short, your problem is that as soon as some assets are sold and the Medicaid recipient has cash, she’ll be ineligible for further benefits. She’ll have to pay privately for her care from that moment until enough funds are accumulated for her to move out of the nursing home. You’ll have to work with a Texas elder law attorney to determine what that is. Some states only seek estate recovery against the probate estate. According to the website www.elderlawanswers.com, that’s the case for Texas. So it should be as easy as putting the assets into a revocable trust to avoid Medicaid estate recovery. But I’d consult with a Texas elder law attorney. If you don’t know one, you can find one on the same website.