The Greatest Financial Risk for Seniors: Paying for

Long-Term Care – Part VI (Protecting the Family Home)

“How can the State make us sell Dad’s farm?” John and Sue are upset and confused by the notice they’ve recently received from the Pennsylvania Department of Human Services, stating that over $250,000 is owed to the State of Pennsylvania out of their late father’s estate. “It’s all he had left when he passed away, and it’s been in our family for three generations. He was approved for Medicaid a long time ago to pay for the nursing home, so we thought that everything had been taken care of. Now we find out that the State is going to make us sell the family farm to pay off Dad’s Medicaid debt. How can this be happening?”

Situations like this are sad, but all too common. Pennsylvania, like all states, is required by the federal Medicaid law to attempt to recover Medicaid payments from the estates of deceased Medicaid recipients over age 55. As discussed in in Part VI of this series, under the Pennsylvania “Estate Recovery” program, when an elderly Medicaid recipient dies, the Department of Human Services will have a claim against that person’s estate for all of the long-term-care Medicaid payments that person received.

But, you might ask, how could there be anything in the estate of a person who had been receiving Medicaid? You have to be “impoverished” before you can be eligible for Medicaid benefits, so your “estate” wouldn’t amount to much, right?

This would be true, except for one thing. Folks in a nursing home can still own their home and be eligible for Medicaid. This is true for married couples if there is a spouse living in the home. But even if you are single and in a nursing home, and so obviously not “residing” in your home, it can continue to be treated as your “residence” and so exempt as long as you check a box on the Medicaid application stating that you “intend to return home.” But at your death your home becomes “non-exempt” and available to repay the state.

Each year Pennsylvania, through this “Medicaid Death Tax” acquires millions of dollars’ worth of family homes from the estates of deceased Medicaid recipients. Had John and Sue realized their father’s farm was at risk, they could have sought professional guidance from an experienced elder law attorney while there was still time to take action and might well have been able to protect the family farm.

Protecting their home is often the main goal of the folks who come to see me. In fact, this is one of the reasons I got into the field of Elder Law in the first place. In my prior life when I handled real estate transactions, it was not unusual to have clients come to an appointment saying they wanted to transfer their house to their kids, “for a dollar.” When I asked them why, the most common response was, “So the nursing home won’t get it.”

While I quickly realized after looking into this that it wasn’t the nursing homes that were to blame, the more I learned about Medicaid and public benefits law, the more I realized how difficult it was for folks to get good, reliable information about Medicaid and nursing homes, and how important it was for folks at risk of nursing home placement to take the proper legal steps to protect the family home.

There are a number of different legal strategies for accomplishing this, and each family’s situation has to be looked at carefully to decide what will work best. However, simply putting the house in the children’s name is almost never a good strategy because: it puts the parents at risk losing their home because of things that can happen to their children over which they have no control (such as debt, divorce, disability and death); it results in the maximum period of ineligibility for Medicaid for the parents if either of them need nursing-home care in the next five years; and it can create an additional tax burden for the children.

Factors that need to be taken into consideration include:

1. Are both parents still alive?
2. Who currently lives in the home?
3. Is there anyone else who has an ownership interest in the home?
4. What is the level of mental competency of the parent(s)?
5. Is either parent in a nursing home or may one or both of the parents require nursing home care in the foreseeable future?
6. Has a child been living in the home and providing care for a parent?
7. Are any of the children disabled or receiving public benefits?

Even in a crisis, it is often possible to protect the home from the Medicaid Death Tax. However, by taking steps to protect your home before someone is in a nursing home means that more of your remaining assets can be protected later on. Next month’s article will continue this discussion of protecting the family home.

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• The Medicaid laws currently permit single people to protect anywhere from 30% to 60% or more of their assets otherwise at risk – and married couples with one spouse in a nursing home 50% to 80% or more of their assets otherwise at risk – even if someone is already in a nursing home. But the rules are complicated and must be strictly followed, so seniors will need the advice of an experienced elder law attorney to help them navigate the bureaucratic Medicaid maze.

Kemp Scales is now retired, but elder-law attorney Schellart Los continues to serve clients throughout western Pennsylvania from offices in Erie and Titusville. She can be reached toll-free at (888) 827-2788 or by e-mail at schelly@losscaleselderlaw.com. The Law Offices of Schellart Joyce, LLC has an Internet presence at www.losscaleselderlaw.com.