Medicaid - Should We Just Go Ahead and Sell the House?

"My mother, who is a widow, has no savings but owns a home, valued at $200,000, and just entered a nursing home. The cost is $6,000 a month! The only way she can afford that is if we sell her house...If we don't sell her house, the state will take it anyway when she dies, right? So what difference does it make?"
My client was in a panic, and while selling the home seemed like the only solution, I suggested the following alternative: Don't sell the house, but instead apply for Medicaid immediately. If mom's only asset is her home, she will definitely qualify (assuming her income isn't unusually high).
"But if the state will take her home after her death, why not just sell it now?" my client persisted.
First of all, the state doesn't "take" a person's home, either during their lifetime or following their death. What happens, as a general rule, is that following the Medicaid recipient's death, the state will make a claim against the estate of the deceased recipient, for the total amount of Medicaid benefits paid out for their care, during their lifetime. (Note that a couple of states still do not seek reimbursement following a recipient's death, even though federal law requires it.)
Thus, if mom only lives for one year after being in the nursing home, and the Medicaid "bill" for her stay in the nursing home for that one year is, say, $50,000, then the family has a choice: keep the house and come up with the $50,000 themselves, or sell the house, pay the state the $50,000, and then divide up the balance of the sale proceeds among the family members, as provided by mom's will.
What if mom lives for many years in the nursing home, so that the bill from Medicaid exceeds the value of the house? In that case, the state is stuck---the most it can get is the net sales proceeds from the sale of the house. It can't go after the children for the balance.
Another reason not to sell the house: If mom applies for Medicaid now, and qualifies, the nursing home will be paid the state "Medicaid reimbursement" rate, which is always a good bit lower than the private pay rate. The actual amount the nursing home must accept varies from nursing home to nursing home, so there is no general guideline. However, assume the Medicaid rate is only $4,500/month, instead of $6,000/month. If mom dies after one year, the family may indeed have to sell the house to raise the money to reimburse the state, but it will only owe 12 x $4,500 ($54,000) vs. what it would have paid had it sold the house and paid the nursing home privately, i.e., 12 x $6,000 ($72,000). Thus, the family saved $18,000 by NOT selling the house! And that savings would increase for every additional month mom lives.
So the longer mom lives in the nursing home, the more the family will save by doing this. However, there is an upper limit: If mom lives long enough, so that the Medicaid bill exceeds the full value of the house, then in effect it will have made no difference whether the house was sold and she paid privately, or kept the house and got on Medicaid. In either case the house will have to be sold to pay for her care, leaving nothing for the family. So her age, health, and life expectancy enter into the equation.
As you can see, some careful thought must be given to this decision. What I did not discuss is the possibility of selling the house, gifting a portion of the proceeds, purchasing an annuity with some of the proceeds, adding a child's name to the deed, transferring a remainder interest in the house to a child, transferring the house (or a remainder interest in the house) to an irrevocable trust, the interaction of the spousal protection rules if mom is married, the limitation on the amount of equity mom can protect in her house, etc., etc. To explore these possibilities, consult an experienced elder law attorney in your locale. To get a running start, however, see my book, "How to Protect Your Family's Assets from Devastating Nursing Home Costs: Medicaid Secrets," which discusses all of these issues and more.
© 2013 by K. Gabriel Heiser
Attorney K. Gabriel Heiser has devoted his legal practice to Medicaid planning, elder law, and estate planning for over 25 years.
NOTE: For more information on this topic and other Medicaid planning techniques, see http://www.MedicaidSecrets.com, which describes an exciting new 318-page book written by attorney Heiser, "How to Protect Your Family's Assets from Devastating Nursing Home Costs: Medicaid Secrets." You don't have to go broke to get Medicaid to pay your nursing home bills, you just have to know the rules and planning techniques. For the first time ever, you can learn the inside secrets of high-priced estate planning and elder law attorneys, in attorney Heiser's new book.

Comments for Medicaid - Should We Just Go Ahead and Sell the House?

Average Rating starstarstarstarstar

Click here to add your own comments

Nov 21, 2013
Rating
starstarstarstarstar
Thanks for the post!
by: Derek Tanner

This is a very well written and informative article. Thank you so much Mr. Heiser for sharing. Your book is worth well more than you are asking for it. The savings are phenomenal. Thanks again.

Click here to add your own comments

Join in and write your own page! It's easy to do. How? Simply click here to return to Main Invitation.

Recent Articles

  1. Pain Management Basics for Your Patient - Caregiverology

    Dec 01, 18 02:56 AM

    Pain management for your patient can be a very touchy and controversial topic. It is difficult to diagnose and sometimes impossible to manage completely. It is experienced and often managed differentl…

    Read More

  2. NIH Stroke Scale Explained in Detail - Caregiverology

    Nov 15, 18 06:46 AM

    The NIH stroke scale is an assessment that is performed by medical professionals on patients in order to determine if they had a stroke. For someone who has had some practice, it should take no more t…

    Read More

  3. Closing Steps for CNA/Caregiver Skills - Caregiverology

    Sep 19, 18 07:26 PM

    This page describes the closing steps for performing certified nursing assistant (CNA) or caregiver skills. These should be the last steps taken after completing any skill.

    Read More