Can Proceeds of Nursing Home Resident’s Home Sale be Protected from Medicaid Estate Recovery?
Question:
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.
Response:
I had not heard of the term “MERP,” but assume you mean Medicaid estate recovery. (Looking on-line, it appears to also refer to a Medical Expense Reimbursement Plan, but I assume that’s not what you’re talking about.)
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.
One alternative may be to put the funds into a (d)(4)(C) pooled disability trust which would be noncountable for Medicaid purposes and still be available to pay for the nursing home resident’s care. Some states permit such trusts to be funded after age 65 and some do not. I don’t know about Texas.
Turning to the second part of your plan, if the Medicaid recipient leaves the nursing facility and returns home, then she will no longer need continuing 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.
Related Articles:
Can I Sell My House Despite Medicaid Estate Recovery?
Medicaid Estate Recovery and Liens
Can I Avoid a Medicaid Lien on My Mother’s House?
How it Works when Medicaid “Takes” your House
2 Ways to Protect House if You Need Medicaid Coverage of Long-Term Care
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