Protecting Your Home From Estate Recovery
Very few people are eager to go into a nursing home or assisted living. Yet, as we age, that level of care becomes a necessity for many people. If physical infirmity doesn't keep us from caring for ourselves, memory issues, such as Alzheimer's, may cause us to need long-term care. According to the United States Department of Health and Human Services (HHS), over 40 percent of people will need care in a nursing home at some point, either on a temporary or permanent basis.
As of 2015, the most recent year for which figures are currently available, the median cost of a private nursing home room in the Dayton, Ohio area exceeded $100,000 annually. This figure is unlikely to decrease in the future.
Given the likelihood of needing care and the expense of skilled nursing care, there is an overwhelming expense looming for many families. Some people who can afford it and qualify for it purchase long-term care insurance. Many people also consult an elder law or estate planning attorney about Medicaid planning, with an eye to reducing countable assets so that they can qualify, sooner, to have Medicaid cover the cost of a nursing home stay.
What many people do not consider, however, is what will happen after their death. Many people are unaware that Medicaid can, and does, recover assets from their estate as reimbursement for funds Medicaid paid during their lifetime for nursing home care. This is known as Medicaid estate recovery.
Keeping Your Home in the Family
You almost certainly intend for your home to remain in your family, or at least to benefit your heirs, after your death. Instead, the Medicaid estate recovery program could require that your home be sold and the proceeds paid back to the state for Medicaid's contribution to your care. Fortunately, with enough advance planning, you can avoid this outcome.
If you are like many people, your first instinct is to deed your house over to your adult child. This may be an unwise choice for a couple of reasons. The first is that if you do so within five years of needing Medicaid to pay for your care, the transfer will be within the Medicaid "look back" period and may delay your eligibility for benefits. The second reason is that if your adult child takes over ownership of your home, it is completely within their control. Even if you think your child will manage the home for your benefit, it is still vulnerable to their creditors or their spouse in a divorce.
Perhaps the best option for protecting your home from Medicaid estate recovery is the creation of a trust designed specifically for this purpose. An experienced elder law attorney can help you to create a trust that will preserve your assets for your family while also allowing you to qualify for benefits in the event you someday need them.
Protecting Your Home With a Trust
For many people, the only asset they have left to leave their family after a lengthy stint in a nursing home is their house. An irrevocable trust may be the best option for protecting your home from Medicaid estate recovery.
As the name suggests, an irrevocable trust cannot be revoked. As such, when you as creator (also called settlor or grantor) of the trust place the home in the trust, you can no longer cancel the trust or remove the house from it and put it back in your own name. Unlike a revocable living trust, which is more flexible, an irrevocable trust is a much bigger commitment. However, a revocable living trust will not protect your home from Medicaid estate recovery because, in essence, you retain as much control over the home as you did when it was in your name. Only by removing the house from your control and placing it in a trust you cannot revoke is the house placed out of the reach of the state's Medicaid estate recovery program.
Because of the permanent nature of such a trust, and the necessity of precise drafting to create the protections you intend, you should consult with an experienced estate planning attorney. An experienced attorney will be able to advise you whether this is your best option in light of all the circumstances, and create a trust document that achieves your goals as fully as possible.
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