Given the rising costs of long-term care, Medicaid has become a key source of funding for taxpayers in need of nursing home care. However, Medicaid coverage is only available to taxpayers with limited resources who satisfy certain means-based tests. Before Medicaid assistance becomes available, most clients are required to spend most of their assets to cover the cost of care — something that comes as a surprise to many.
Clients who have yet to experience the need for Medicaid-funded long-term care may be reluctant to engage in planning due to the sensitive nature of the topic. Those clients should be advised that it may be necessary to act several years before the need for long-term care arises — especially if the client wishes to preserve their family home for future generations — and that state trust requirements can affect the validity of any Medicaid transfer if the client decides to move to Florida.
Medicare Eligibility Basics
Preserving the family home is often one important issue in Medicaid planning. One complication that often arises in situations involving married spouses is that while one spouse may require care in a nursing facility, the other spouse may be healthy enough to continue living in their primary residence.
In these cases, the value of the primary residence is not counted in determining whether the other spouse qualifies for Medicaid coverage. On the other hand, once the healthy — or "community" spouse — also requires care in a facility or passes away, the value of the primary residence will be considered a resource that can be used to help offset the cost of nursing home care.
Once the primary residence is considered a resource, of course, it can be liquidated or subject to a lien to cover the cost of Medicaid benefits that have already been paid.
Planning to Preserve the Family Home
There are, of course, strategies that can be used to preserve the family home. There are two primary options for retaining control of the family home. The first is to actually transfer ownership to a third party (typically, a child or grandchild), while retaining a life estate.
The life estate gives the client the right to continue to live in and control the residence for life, while removing the residence from the available pool of resources for Medicaid purposes (note that given strict legal interpretations that apply in many states, this strategy typically only works where the home is the client's primary residence).
