The Not So Hidden House Gift
There are some transactions people do or plan to do because they may think it is a good idea to protect assets when a loved one needs nursing home Medicaid benefits. Without a Woodlands Elder Law attorney working with you to make sure you fully understand the legal ramifications and alternatives of any given transaction you can end up with a big problem. One of the most common variety of transactions people ask me about are what I call “hidden gifts.” The reason I call them “hidden gifts” is because on the surface you may not think of them as gifts but the HHSC does and they do levy penalties when they are discovered.
So what exactly is a “hidden gift?”
Here is one common example I encounter. If a Medicaid applicant owns a home which they will no longer be using because they are staying in a nursing home, certain family members come up with the idea that it would be a perfectly acceptable transaction for them to take over the debt on the house in exchange for receiving title to the house. Or, they come up with some low-ball figure that is nowhere near close to the fair value of the property. These people believe that because they are paying something (or anything) for the property the HHSC will not recognize the transaction as a gift which will result in a Medicaid penalty.
They are wrong. The HHSC looks at the fair market value of the property transferred and compares it to what the Medicaid applicant received in return. If the Medicaid applicant received less than what the property was worth then that is the basis for a Medicaid penalty.
In the first example above the equity in the home would be the amount of the gift. So if the property was worth $150,000 and the debt that the family member is taking over is only $100,000 then the amount of the gift creating the penalty is $50,000! In the second example the difference between the amount paid by the family member and the actual value of the property would be the amount of the gift and the basis for the Medicaid penalty. So if the property was worth $150,000 and the family member only paid $95,000 the amount of the gift creating the Medicaid penalty is $55,000!
This is just another glimpse into the countless rules and regulations that determine whether your loved one will qualify for nursing home Medicaid benefits. As you can see, sometimes things that might appear harmless on the surface can result in an outcome you were trying to avoid. If your loved one does not have the financial resources to deal with the costs of a mistake then do it right the first time with a Texas Medicaid attorney. An ounce of prevention is worth a pound of cure.