Medicaid Planning with your House - Married Couples
Another attorney called me today to chat about what to do with a married couple client who was consulting him about how to protect their house from being "sold for the nursing home".
It would be wrong to say that your house can't be sold to be pay for your long term care needs - it can. However, the Medicaid rules respect the central importance of a home for security and peace of mind for older Americans. With some understanding of the rules, you can act to protect your home.
If you are married and in need of long-term care, and your spouse is living at home, your home is deemed a "Non-Countable Asset" for Medicaid purposes. In simple terms, your house doesn't exist as far as Medicaid is concerned. You will be required to spend down your other assets to appropriate levels to qualify, but you can keep your house. Note that your other assets are generally any other asset that can be liquidated, whether in your own name, your spouse's name, or in joint name with any other person - excluding personal property.
So as long as the spouse is living at home, your house is protected from the costs of your nursing home care. The next question is what happens if the spouse is no longer living at home.
If the spouse living at home dies, and the house is in joint names, ownership passes to the spouse in the nursing home - and immediately becomes an available asset that must be spent-down before Medicaid may continue. Medicaid may also seek recovery of amounts already paid. A solution to this is for the spouse living at home to (1) change the deed to his or her own name, and (2) change their Will to leave the house to the children or other family members. The surviving spouse may have a Right of Election - the ability to take approximately 1/3 of the estate even though it has been left to other persons - that may impact how much of the house passes to the children, but you have minimized the risk that the entire house value will need to be spent down for Medicaid purposes.
Once the spouse living at home has changed the deed and his or her Will, it may be appropriate to consider transferring the home to the children. Making a gift of the home after Medicaid has been approved for the spouse in a nursing home does not affect that spouse's Medicaid eligibility, and it may avoid the right of election described above.
Considerations in making a gift of the house to the children will be left for another post.