Protect Your Home From Medicaid Liens (March 2010)

PROTECT YOUR HOME FROM MEDICAID LIENS

More and more senior citizens are becoming concerned about nursing home costs.  No one really wants to go to a nursing home.  Nearly every elderly person would prefer to stay at home.  However, no matter how much children love their parents, caring for an elderly parent at home can be so stressful that a stay in a nursing home often becomes necessary.  A Kaiser Family Foundation Survey in 2003 found that if you are 65 years of age or older, there is a 45% chance that you will spend some time in a nursing home.  The average nursing home stay is 2.4 years.

Medicaid is the most common way of paying for nursing home costs.  When you apply for Medicaid for nursing home costs, they will count your assets to see if you qualify.  They do not count the value of your home.  However, there is a trap here.  Even though the Medicaid rules say that your home is an “exempt” asset which is not counted when you apply for Medicaid, once you are on Medicaid, they may be able to put a lien on your home.  A lien is like a mortgage.  It will guarantee that the government will be paid back money that they pay for your nursing home costs.

For example, suppose you have to spend the last 3 years of your life in a nursing home.  Suppose you have very little in assets besides your home.  Medicaid pays your nursing home bills, but puts a Medicaid lien on your home.  At a cost of $9,000 per month, your nursing home stay could cost $324,000!  After you pass away, you owe to the government the entire amount they paid for you.  The government will approach your children who are hoping to inherit the home.  They will give your children a chance to go to a bank to borrow the money to pay off the amounts Medicaid paid for your nursing home costs.  If your children want to keep the home, they are forced to buy it.  If they cannot afford to do that, the government could sell the home, and keep the proceeds from the sale, up to the amount that is owed to them.  If there is any money left over after all expenses, your children get to keep the extra.

Because of the great danger of losing the home to nursing home costs, it becomes important to understand how you can protect your home from Medicaid liens.  The first thing to remember is that a Revocable Living Trust will not protect your home from nursing home costs!  This is one of the most common misunderstandings.  Many people have a “living trust” and think they are safe.  A living trust (also called Revocable Living Trust) will protect your assets from probate, but it will not protect from nursing home costs.

The government will not place a lien on your home as long as your spouse is living in the home.  The danger is that the spouse who is living in the home could die first, or also end up in a nursing home.  Then the home is no longer protected from Medicaid liens.  This kind of problem can be prevented by advance planning.  In my opinion, the best method for protecting the home from nursing home costs is for the parents to give the home to the children, but to keep a “life estate.”  A “life estate” means that the parents can live in the home for the rest of their lives.  Yet, they have given the home to the children.  (For those of you who do not have children, I apologize for always talking about children.  This technique will work just as well with a niece or nephew or anyone else you choose to inherit your home.)  In next month’s column, I will explain in more detail how this life estate method works.

OKURA & ASSOCIATES, 2010

96 replies
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  1. Sue
    Sue says:

    We live in Florida – my Mother holds the mortgage to my home. It is suppose to pass to my son (her grandson) upon her death. She now has a need to enter assisted living with the aid of medicaid. Can a lien be put on my home to reimburse medicaid after her death? Can medicaid end up being the mortgage holder or would this still pass to my son in probate? Would it make a difference at this time if the mortgage was modified to state it was null and void upon her death? Additionally my mother currently owns her own home which she plans on selling and is being told she can keep that money (approx $50-60k) in a trust to use and that medicaid would take whatever was remaining after her death. She does not want me to end up losing my home due to this and we are trying to find the correct way to handle the situation in a short period of time.

  2. britney M
    britney M says:

    Hi, I’m in Michigan. My grandmother was staying with me and I had to place her in a nursing home because I found out she have Dementia. The nursing home has summitted a medicaid application for her. Right now she has 100 days left on her Blue care network. My grandmother recieves Social Security a total of 1100.00 dollars a month. Her income was helping me with the bills. I’m her guardian and since she is not going to have to use her social security for a few months to pay for the nursing home. If i used her money for bills, will that affect the process of her medicaid?

  3. Lyn
    Lyn says:

    My grandmother is in the nursing home. I am her grandaughter and have POA over all her finances. I have been paying for the nursing home costs, medicine, etc for the last year and a half with the money my grandmother saved up. He money is just about spent out and I have applied for Medicaid for her and have been denied so far and I am working on appealing their decision. Last night my husband and I decided to go ahead and buy her house before Medicaid starts to pay her medical expenses so we can keep the house in the family. The house has been paid off. My question is, by law, can we buy the house before Medicaid starts payments even though they denied us so far and we are in the process of an appeal? The money that was used to buy the house will go directly to my grandmother which will continue to help pay for her medical expenses so Medicaid does not get involved.

  4. Terri P
    Terri P says:

    In Jan of 2008 my mom deeded her property to myself and my sister for $1.00, it was divided off into 2 different parcels which my sister lives on the one deeded to her. the other one which was deeded to me.. mom lived on in a mobile home that was purchased with a 42,000.00 CD in 2010, which had our names on the CD but when mom purchased the mobile home it was put in my name, my mom fell and broke her back and now is in transitional care in a nursing home but it looks like she will not be able to come back home at all, she has dementia and is getting worse then better, she is 87 yrs old, we cannot afford to pay for her care so if we apply for medicade at this point what will happen?…I found out my sister has a taken out a $16,000.00 mortgage against her parcel of land what kind of mess are we in due to this nightmare that we are facing? I have power of attorney for mom that states real property transactions: To lease, sell, mortgage, purchase, exchange, and acquire, and to agree, bargain, and contract for the lease, sale, purchase, exchange, and acquisition of, and to accept, take, receive, and possess and interest in real property whatsoever, on such terms and conditions, and under such covenants,as my agent shall deem proper, it also states to accept receipt for, exercise, release, reject, renounce, assign, disclaim, demand, sue for, claim and recover any legacy, bequest, devise, gift or other property interest or payment due or payable to or for the principal assert any interest in and exercise any power over any trust, estate or property subject to fiduciary control and so forth. Just need to know is mom even eligible for medicade and if so what can they do after her death on the land and mobile home and what about the mortgage my sister has taken out? Really needing help lost on what can be done.

  5. Terri P
    Terri P says:

    Sorry forgot to say we live in Tennessee, not sure if that makes a difference or not.

  6. Sanford Okura
    Sanford Okura says:

    Gary, the specific type of care that you must have provided to have a transfer of the property to you be an exempt transfer may vary from state to state and from Medicaid worker to Medicaid worker. However, if Mother would not have been able to stay at home without your help, that care you provided is probably sufficient. If your mother is willing to transfer the property to you, be sure that the transfer is made before a Medicaid lien is placed on the home. Consult with an attorney experienced in Medicaid eligibility and estate planning in your state as to the best way to do the transfer (straight transfer vs. transfer with reservation of life estate).
    This advice is for general information only. The facts of your case may change the advice given. Do not rely on the information in this column without consulting a competent attorney specializing in Medicaid Planning.

  7. Sanford Okura
    Sanford Okura says:

    CC, as a general rule, when a person passes away with liens on property, the person who inherits the property gets the property subject to the liens. Generally, one does not have to pay off the liens to take ownership. I practice in a separate property state, so you will have to check with an attorney in your community property state as to whether there is any difference in your state. This advice is for general information only. The facts of your case may change the advice given. Do not rely on the information in this column without consulting a competent attorney specializing in Estate Planning.

  8. Sanford Okura
    Sanford Okura says:

    Linda, if Mom is 65 or older and has Medicare, it is Medicare that pays primarily for rehabilitation from an injury, rather than Medicaid. Medicare pays 100% of skilled nursing care for 20 days, then all but $144.50 a day (in 2012) for up to another 80 days. Medicare will not put a lien on the home. If Mom’s condition is downgraded to custodial care and Medicaid starts paying for her, then unless there is a relative living in the home that qualifies for an exemption from placement of a lien, a Medicaid lien can be placed on the property. The government should send her a notice before placing a lien. If you are not sure whether a lien has been placed, the surest way is to have a title search done on the property. If you don’t want to spend the money for a title search, find out from the Medicaid office the contact information for the department that places Medicaid liens, and ask them whether a lien has been placed. In Hawaii it is the Recovery Unit of the State Attorney General’s office that places Medicaid liens on property. If Mom in the past signed a deed to transfer the property to your son but never recorded it, an important question is whether you should now record the deed. If the deed was signed more than 5 years ago and you can take the position that the transfer occurred then, you should record the deed before a lien is placed. If the deed was signed less than 5 years ago, then the transfer would create a Medicaid penalty and your mother would lose Medicaid benefits. But if the deed is not recorded, a lien could be placed on the property. It would be important to have the papers examined by a competent Medicaid attorney, and to get advice as to what you should do.

  9. Melissa T
    Melissa T says:

    Today we found out that our land lord passed away, she had been living in a nursing home.  About six months ago the state of Washington put a lien on the property. My question is what will happen to the property will we have to move? I know that her children don’t want the property. Please help!

  10. sanfordokura
    sanfordokura says:

     @Melissa T Since the children don’t want the property, if the value of the house is greater than the amount of the lien, the children could sell the property, and you would have to deal with the new buyer who may either continue to rent to you or ask you to leave.  If the children do nothing, the State of Washington could sell the property, and you would then have to deal with the buyer.  Depending on how busy they are, the state employees and attorneys who deal with foreclosing on Medicaid liens could take months or even years before anything happens.  You probably are ok just staying put until you are given notice that you have to leave.  You could offer to pay rent to the estate of your deceased landlord.

  11. Sanford Okura
    Sanford Okura says:

    Lyn, you can buy the house, but since your grandmother will have cash from the sale of the house, that cash will disqualify her from Medicaid benefits. You need to find and hire a competent attorney in your state with expertise in Medicaid for nursing home costs.

  12. Sanford Okura
    Sanford Okura says:

    Britney, you should use her money to pay her bills, but not yours. You need to get guidance from someone familiar with the Medicaid rules in your state.

  13. Mike1947
    Mike1947 says:

    My mother’s house is in a life estate.  She has been in the nursing home for a little over a year now and is almost 96 years old.  The renters are leaving in July, can I sell the house in Indiana and keep the proceeds or does Medicaid get a portion?  Thanks for the quick reply.

  14. Deborah
    Deborah says:

    Hi. I haven’t seen this question posted previously so I hope you can help. My mom has been in  nursing home in Memphis, Tennnesse since Dec. of last year. We realize that in selling her house the proceeds will go to Medicaid to help pay for her care. She is in an excellent facility and that seems very fair to my husband and me. However, we’re discovering that selling her home is no easy proposition. The value has dropped, although the house itself is in remarkably good condition, even though the area around it is declining. We’ve had a lot of interest in the house but few qualified buyers. We finally have got someone who is qualified for an FHA loan…but ONLY if we can pay the $4,700 closing costs, the $2,300 agent commission….and now, as a result of the inspection, there’s another $2,000 in repairs and expenses. That means it will COST us to sell a house we will never get a penny from. Will Medicaid allow us to deduct these expenses? It seems that they should, because we have gotten a lot of calls from investors who would pay us $40,000 cash for the house. It’s listed for $76,000 and recently assessed  at $85,000. If Medicaid won’t let us get reimbursed I see little reason for us to continue with this potential buyer. What do you think?  Deborah

  15. Erin A
    Erin A says:

     
    There is some property that we would like to purchase. They lady is in the nursing home and is willing to sign the property over to us. But the property is in litigations with the state for the last year. How can we go about purchasing the property? It has been setting vacant for 3 years and will not really be worth much if it keeps sitting. My grandfather lives right next door this is why we want it so much. All her family lives in CA and does not have to money to purchase the property and they don’t even want the property.  Please help. This is in the state or Arkansas I don’t know if you need that information.

  16. beans44
    beans44 says:

    My Mother and I owned a home with a “Joint Tenency with Right To Survivorship” Deed. Mother was on Medicaid in a rest home for 4 years until she died. The home went over to me, but  shortly after a Medicaid lien as put on her half of the home.  I now live with my soon to be wife and son in this home. Q. In the event that I passed , say tomorrow, is there anyway to protect my family from Medicaid forcing a sale of the home so they can remain in the home? 

  17. kyland
    kyland says:

    my mother never went to a nursing home although i lived with her fore four years before she died her lawyer did not do what he was supose to do and put my name on the deed after 2 years something he was supose she passed last week is there anything in i can do to kep the home

  18. kyland
    kyland says:

    i have been living and taking care of my mother for 4 years before she passed last week since i was able to take care of her without putting her in a nursing home how could they put a lein on the house my mother left to me in her will she had als which was a difficult diseae to feal with you would u would think i saved the state ome money from not putting her in a nursing home

  19. kdbrechbuhl
    kdbrechbuhl says:

    We are in the state of Ohio and last November my grandmother went into a nursing home. Got a call a few days ago saying we need to sell her property to pay back medicaid. Or we have to show proof by November that it is for sale. From what i have been reading does the state have to wait for her death before they require us to sell? Or can they force us to sell it now?

  20. deninponca
    deninponca says:

    My Dad deeded me his house back in 2004 with a reservation with life estate. He has now entered into a nursing facitity and I am applying for Medicade. Can I sell the house before I apply for Medicade and keep the proceeds, or will the proceeds be subject to Medicade qualifications? I live in Texas.

  21. MichaelLouis
    MichaelLouis says:

    My mother gave my brother and I power of attorney over her estate last year.  Since then she has had brain surgery from a fall and is now in a nursing home with dementia symptoms.  Thinking it was the best thing to do, we transfered the deed of the her home into our names.  (The home is only valued at $35,000.)  Now we are being told by her caseworker that we should not have done that and could be penalized for it.  Should we put it back in her name or was this a legal move?

  22. dsamp739
    dsamp739 says:

    My Father is in a nursing home and my Mom has to pay $450.00 per month. She owes on her home with out any equity in it. What happens to the home and Mortage loan if Meicade takes it?
     

  23. dsamp739
    dsamp739 says:

    My Father is in a nursing home and my Mom has to pay $450.00 per month. She owes on her home with out any equity in it. What happens to the home and Mortage loan if Meicade takes it?

  24. BonnieSue
    BonnieSue says:

    My dad is in a assisted living with Medicaid paying. My sister is power of attorney since he has dementia.  My sister and I are on his home under “joint tenency with right of surviorship”.  We owe 80,000 on home and it’s value is approx. 100,000. will medicaid want 1/3 of the amount left after paying off the loan, which would be from the 20,000 or less after sold?  I wasn’t sure if we needed to give them anything since we owe 80,000 on it. We wanted to buy him out if possible.

  25. Kelly
    Kelly says:

    I’ve taken care of my mother for 20 years, she did not go into a nursing home.  She had no real estate or bank accounts.  Before she died she signed the title to me and I applied for the change which went through 5 days after her death.  Today I received a letter from Idaho dept of Health and Welfare providing a ‘claim’ against her estate for yearly expenses of 9000.00.   Isn’t the mobile home exempt as it’s not considered ‘real’ property?   I’m worried because on the form they list a mobile home.

  26. EmptyFaces
    EmptyFaces says:

    I have a similar dilemma. I purchased a home in 2006 with the partial funds of a previous home sale. After a tumultuous twelve year divorce my credit was in shambles, so I purchased the home under my then ill mothers most perfect credit in order to receive a decent rate of interest for the property purchase. Sin months later I transferred title to an irrevocable trust in which we were both trustees. She was placed in a nursing home facility in 2008, two years later. I am her caregiver and have kept her alive for 22 years learning and diagnosing illnesses and delegating medications. We lived together since 1990 when she had fallen ill. Medicaid had propitiously placed an open lien on my home. Prior to such lien’s assertion I had moved to transfer title from the trust to my corporation. All funds attributed were that of my own only. The need of a better interest rate was my primary objective in choosing my mother as the temporary title holder. In no way had she any viable income to sustain mortgage payments all the less a hefty down payment. What are the legalities in which I must face futuristically. I live in the home; she does not.

  27. EmptyFaces
    EmptyFaces says:

    I purchased a home in 2006 with the partial funds of a previous home sale. After a tumultuous twelve year divorce my credit was in shambles, so I purchased the home under my then ill mothers most perfect credit in order to receive a decent rate of interest for the property purchase. Six months later I transferred title to an irrevocable trust in which we were both trustees. She was placed in a nursing home facility in 2008, two years later. I am her caregiver and have kept her alive for 22 years learning about illnesses she has  diagnosing them and delegating medications. We lived together since 1990 when she had fallen ill. Medicaid had propitiously placed an open lien on my home. Prior to such lien’s attachment I had moved to transfer title from the trust to my corporation. All funds attributed were that of my own only. The need of a better interest rate was my primary objective in choosing my mother as the temporary title holder. In no way had she any viable income to sustain mortgage payments all the less a hefty down payment. What are the legalities in which I must face ritualistically. I live in the home; she does not.
    lifes_child@yahoo.com

  28. Ooooooooo
    Ooooooooo says:

    @Kelly, if it IS a mobile home & u really don’t want 2 lose it, if I were in ur shoes, I’d move it 2 an undisclosed place 4 its protection, never 2 b found again. I personally, would just vanish since ur mom DID give it 2 u. Most mobile homes r just that: mobile

  29. Ooooooooo
    Ooooooooo says:

    @kyland, maybe if she knew the system, she would’ve considered doing what family owned businesses do; transfer the place 2 the kids long b4 anything had a chance 2 happen 2 her. Hopefully this will shed light on future recipients who r meant 2 have a family home

  30. Ooooooooo
    Ooooooooo says:

    @Melissa T, it sounds like u may have 2 move. However, as a long time tenant, my LL also passed & my rental was fortunately passed 2 his brother who soon put it up 4 sale. I knew I wouldn’t go nowhere, & sure enough, after several ppl passed thru here, a good LL who heard how good a renter I am bought my place & kept us tenants. Now I can only hope this will b ur case also. What I’d do now, is start packing what u wanna take & donate what u don’t wanna take. Just b prepared just in case,mince ur place WILL likely hit the market. Get a real estate magazine & keep an eye on the place. Don’t move til ur forced out

  31. Ooooooooo
    Ooooooooo says:

    @Sanford Okura @Melissa T sounds like u may have 2 move. However, as a long time tenant, my LL also passed & my rental was fortunately passed 2 his brother who soon put it up 4 sale. I knew I wouldn’t go nowhere, & sure enough, after several ppl passed thru here, a good LL who heard how good a renter I am bought my place & kept us tenants. Now I can only hope this will b ur case also. What I’d do now, is start packing what u wanna take & donate what u don’t wanna take. Just b prepared just in case, since ur place WILL likely hit the market. Get a real estate magazine & keep an eye on the place. Don’t move til ur forced out

  32. Ooooooooo
    Ooooooooo says:

    @Lyn, buying the home NOW sounds like a real winner. I personally would go ahead & buy it if u choose, THEN appeal medicaid’s decision AFTER the home’s rightfully urz fair & square. Meanwhile in the process, make good & SURE no loopholes will let Medicaid lien the home w/ it in ur name. Yes, in ur shoes, I’d buy it NOW b4 it’s 2 late

  33. Ooooooooo
    Ooooooooo says:

    @Lyn, buying the home NOW sounds like a real winner. I personally would go ahead & buy it if u choose, THEN, make good & SURE no loopholes will let Medicaid lien the home w/ it in ur name. Yes, in ur shoes, I’d buy it NOW b4 it’s 2 late. As 4 cash, I’d see about having some sort of system in place 2 protect it 4 her. Maybe even guardianship? Guardians I hear have the most power 2 act on a person’s behalf & make decisions legally on their behalf. Do all u can & close ALL possible loopholes u can so the system can’t take what belongs 2 ur family

  34. Ooooooooo
    Ooooooooo says:

    @Lyn, buying the home NOW sounds like a real winner. I personally would go ahead & buy it if u choose, THEN, make good & SURE no loopholes will let Medicaid lien the home w/ it in ur name. Yes, in ur shoes, I’d buy it NOW b4 it’s 2 late. As 4 cash, I’d see about having some sort of system in place 2 protect it 4 her. Maybe even guardianship? Guardians I hear have the most power 2 act on a person’s behalf & make decisions legally on their behalf. Do all u can & close ALL possible loopholes u can so the system can’t take what belongs 2 ur family. As 4 bills, yes, paying her bills off w/ the cash also sounds like a winner. I’d speak 2 ur relative about this as a potential possibility.

  35. Ooooooooo
    Ooooooooo says:

    @Linda, do u all have actual copies of the paperwork? If so, u may take them 2 the courthouse & show them 2 whoever needs 2 c them. Ask them y this was never recorded & insist on recording it right then. Do whatever steps r needed 2 record this IF u have ANY paperwork PROVING this

  36. Sheryl
    Sheryl says:

    My mother has about $100,000 equity in her house, if she sells it and moves into an independent/assisted living facility and then uses the equity money within 3 years on living expenses then needs to apply for Medicaid. Will Medicaid go back 5-years and make her come up with $100,000 before they will help?

  37. Jesse
    Jesse says:

    Hi. I have a question pertaining to my grandmothers estate. She currently owes 20,000 in back property taxes and has been receiving medical senior citizens live at home assistance which is funded by her medicaid/medicare. Now I do not know whether to pay the taxes because her health is deteriorating rapidly and I do not know if the liens will end up taking the home regardless. Could I still transfer the title of the home to one of her grandchild’s name and protect the house from any liens?

  38. rosie
    rosie says:

    I live in pa. 10 yrs ago my grandmother put me on the deed with her I have no choice but to put her in a nursing home. I live in the house still. Can they come after it

  39. ethan
    ethan says:

    @Sheryl, the short answer is no. Any money that your mother spends on her own care/living expenses/needs will not be considered a “gift” or “transferred for less than fair market value” within the lookback period. However, just so know, after February 8, 2006, the lookback period is now 5 years, not 3 years.

  40. Ethan Okura
    Ethan Okura says:

    @Jesse, if she’s already receiving Medicaid assistance for nursing home care and has a lien placed on the home, then it will be trickier to avoid paying back the lien amounts and protecting the value of her home. Simply transferring the title of her home to a grandchild will not protect it from any pre-existing liens, and in fact doing so will likely get her kicked off of Medicaid assistance. However, if there isn’t a lien on the property yet, or if the value of the property is high enough that even after paying off the liens there would still be value, then there is a way that we can protect at least half (and possibly up to 3/4) of the remaining equity value for her family. If you believe there is equity to save, feel free to contact our office to schedule a consultation.

  41. Ethan Okura
    Ethan Okura says:

    @Rosie, the laws vary slightly from state to state. However, the federal law which allows her to transfer her home property to a child without penalty (as I mention below) applies to all states. The answer to your question depends on a number of factors. Primarily it’s how your grandmother put you on the deed with her. If grandmother is still on the deed as joint tenants or tenants in common with you, it’s possible they could come after the property to recover their expenditures after her death. In Hawaii, as long as grandmother only owned a life estate in the property, it would be protected from recovery after her passing as long as you don’t sell the property during her lifetime. One possibility, which may sound extreme but we’ve done for our clients successfully, is the following: 1) You could have grandmother legally adopt you so that you become her daughter; 2) She can transfer ALL of the property out of her name into yours; 3) There would be no penalty for her to qualify for Medicaid assistance even though she transferred her portion of the property to you as long as you’ve lived with her for the 24 months prior to her entering the nursing home and you’ve helped to take care of her.

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