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Question:

My wife and I have a home with joint tenants with right of survivorship with my elderly mom. We have been taking care of her for a few years. We are thinking that a move to an assisted living facility might be beneficial to her but worry about being forced to sell our family home down the line because my mom went to assisted living prior to a nursing home. Between her pensions and money we have, we could afford the monthly payment for the facility. But,we’re not sure if this would affect things with a future Medicaid application. Also, would the 2-year family caregiver provision play any role?

Response:

I assume your mother lives with you. If so, you’re in good shape. Those applying for Medicaid may keep their prior home, so your mother’s interest in your home will not affect her eligibility for benefits. However, should she receive benefits, the house may or may not be protected from Medicaid estate recovery upon your mother’s death.

All state Medicaid programs are required to seek recovery of their expenses from the estates of beneficiaries after they die. However, some states restrict such recovery to their probate estates and do not go after property that passes outside of probate, such jointly held property like your home. If you live in one of those states, your mother’s interest in the house will pass to you and your wife without going through probate and will not be subject to estate recovery. (You will, however, have to file a death certificate with the registry of deeds to effect the title change.)

But if you live in a state whose Medicaid program does seek recovery from non-probate property, your mother’s one-third interest in the house could be subject to claim upon her death. You can avoid it by her transferring her interest to you and your wife. But if she were to apply for Medicaid during the subsequent five years, she could be deemed ineligible for a period of time due to the Medicaid transfer penalty. This is where the caretaker exemption could come in.

Medicaid does not penalize transfers of the family home to a child who has lived with the parent and provided care for at least two years. It sounds like you could qualify. but it can get a bit complicated. For one thing, you qualify, but not your wife. So your mother would be transferring her interest in the house to you. You could then transfer it to your wife to even things out, but it would probably mean two separate deeds to complete the transaction. In addition, there are potentially some adverse tax consequences to taking this step in that you would lose the partial step-up in basis upon your mother’s death which could reduce your capital gains in the future if you and your wife were to sell the house.

I would recommend consulting with a local elder law attorney to determine whether your state Medicaid program only seeks estate recovery against the probate estate or has expanded estate recovery against non-probate property as well. If it does, the attorney can also advise you on the best method to protect the home in your situation and under your state’s application of the Medicaid rules. You can find an elder law attorney at www.elderlawanswers.com.

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