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By John M. Bigler For many seniors on Long Island, their largest asset is their home. For Medicaid purposes, the home is considered an exempt resource, meaning that it doesn't count as an asset when establishing eligibility for Medicaid.
In most cases, transferring the house results in a period of ineligibility for Medicaid coverage in a nursing home, the same as the transfer of liquid assets. However, for some seniors the transfer won't result in a period of ineligibility if the person they're making the transfer to qualifies as an exempt person. Transfers to a spouse, minor or disabled child, brother or sister who has an equity interest in the house and has lived in the home for at least a year, or a transfer to an adult child who has lived in the house for at least two years and is presumed to be caring for the parent, do not result in a period of ineligibility for nursing home Medicaid. In regard to the adult child, the presumption is that the child is caring for the parent and so it would be up to the Department of Social Services to rebut that presumption. In my experience, usually when the child is living in the house, the parents are taking care of the child, but the presumption is a favorable one and we use it to our advantage.
For seniors who can take advantage of an exempt transfer, there isn't the immediate need to make the transfer so as to start a period or ineligibility. The transfer can be made at any time, even upon entrance into the nursing home, and won't result in any penalty period. The question for these seniors then is when is the best time to make the transfer. They will have the luxury of being able to wait although many prefer to take action earlier. There's always the fear that the exempt individual won't be available when the need to make a transfer exists. There's always the possibility that the spouse, minor or disabled child, sibling or adult child living in the home might pass away prior to making the transfer. That person might also decide to move. I always caution clients that if there is the possibility of a move, then the transfer should take place before the move occurs. There's no prohibition on the exempt individual moving from the premises once the transfer has been made.
Sometimes there's a concern that the transfer to the exempt individual will slight other members of the family who were intended to be partial beneficiaries of the house. This is not a problem either. For example, a deed transfer to an adult child who has lived in the house for at least two years, or to a disabled child, can be immediately followed up by a second deed from that child to all of the children. Unlike transfers to spouses who must retain the asset in their name until Medicaid has been approved, there is no such restriction on transfers to children or to siblings.
In most cases, the transfer will take place with a retained life estate for the senior who has made the transfer. In this way the STAR program and veterans' real estate tax discounts will be protected during the lifetime of the senior. This will also mean that the beneficiaries will receive the house after the death of the senior with a step up in basis from the value at the time the house was purchased originally to the value at the time of the death of the senior. The senior will also still be entitled to all income generated by the house, such as rent.
In some cases, the family may determine that the life estate isn't necessary. For example, if a child is living in the house and intends to continue to reside there, then after two years of ownership, that child will have their own capital gains exclusion on the property and so the step up in basis may not be so critical. Also, if there's a significant rental income generated by the property and if the senior is in serious danger of needing nursing home care, the family may decide that the benefit of retaining the income from the rental outweighs the loss of the real estate tax savings.
Another serious consideration in making transfers is whether to make a transfer with a retained life estate or transfer into an irrevocable trust. I will look into the benefits of either type of transfer in more detail next month. However, if an exempt transfer can be made, then typically the benefits of the trust will be outweighed by the benefit of eliminating a period of ineligibility.
As always, each case has to be examined on an individual basis. Before making any decision regarding a house, it is absolutely critical that the various possibilities be discussed in detail and understood clearly.
Reprinted with permission of the Suffolk Times © 2004 [ Contact Us ] [ Guestbook ] [ Email ]  The Law Offices of John M. Bigler, Attorney At Law 1421 Wantagh Avenue, Wantagh, New York 11793-2206 1-888-ELDER-LAW · 516-409-6565 · Fax: 516-409-6522 E-Mail: info@biglerlaw.com · Web Site: www.biglerlaw.com |
However, many a family has been terribly surprised after the homeowner's death when they find that the Department of Social Services has attached a lien to the house to recover benefits paid out by the county during the homeowner's lifetime. Therefore, consideration has to be given to protecting the home as part of Medicaid planning. Many seniors who are in good health may choose to take some action regarding the home while still retaining liquid assets in their own name. One of the beauties of planning in regard to the home is that a transfer can be made while still retaining a significant degree of control.