When your parent wants to protect their home from nursing home bills, they’re not alone. The good news is in many cases we can achieve this goal.
The bad news is novice mistakes are out there to trip you up. They can turn your quest to protect assets from nursing homes into a never-ending nightmare for you and your parent.
Today we are going to look at one family and examine where they went wrong. Why? So you can avoid repeating their expensive mistake.
Antoinette was like many people. She wanted to leave her home to her daughter. This goal takes on urgency for people as they age. It gradually becomes more difficult for them to keep up with the maintenance of the home. This usually coincides with a decline in health.
Antoinette experienced this familiar story. The time came where she would no longer be able to stay at home, but she wanted to protect it. So, she came up with an idea. She had the great idea of preparing for a nursing facility that could provide around the clock care. But her trying to create eligibility without the assistance of an experienced Medicaid attorney was not a great idea.
Antoinette’s mistake got her a “transfer of assets” penalty for $315,682.55. That penalty prevented her from getting Medicaid long term care services.
She had no money left.
She needed those benefits but could not get them for almost three years.
Lessons for All to Learn: Get Help First!
This is a sad story. But if you learn from her mistakes then it was not in vain. Antoinette bought a house with her daughter, Nancy, for $302,000. They split the costs and mortgage 50-50.
In 1994, Nancy agreed to also pay her mother’s portion of the house expenses. She did this in exchange for the right to buy her mother’s half of the house for $80,000. Nancy ended up paying over $319,000 of her mother’s expenses.
In 2012 Antoinette sold her share of the home to Nancy for $80,000.
Antoinette suddenly became ill. She suffered a stroke in 2013 and was admitted to a long-term care facility. Like many people, she could not afford the huge nursing home bills and needed Medicaid benefits.
When Antoinette applied for Medicaid, she got a huge surprise. They imposed an eligibility penalty of almost three years because of the house transfer to her daughter.
That means for three years Medicaid would provide $0 in assistance with nursing home expenses. With no money left and a three-year penalty, how could she possibly afford the care she needed?
Unfortunately, she died without the benefit of Medicaid assistance to pay for her care. She died while her family was embroiled in litigation over this issue.
All this Started with One Bad Idea
Antoinette had two ideas. The first idea was to protect her home. That was a great idea and I fully support her in that. Her second idea was where she messed up. That was to try this high risk maneuver to transfer assets without the best advice.
Her whole story comes down to one simple question. Did she receive $80,000 or $399,000?
Well, the house was appraised at $817,600. So, the one-half Antoinette owned was worth $408,800. She sold it to her daughter for $80,000. Nancy thought she was in the clear when she paid $319,000 of her mother’s expenses but she still got whacked for the huge penalty.
How can you avoid making the same devastating mistake?
Transfer of Assets and Look-back Period: What You Need to Know
Antoinette fell victim to the “transfer of assets” and look-back period of Medicaid. This is where the Health and Human Services Commission reviews all transfers within 60 months prior to a person applying for Medicaid eligibility. Specifically, they hunt for any transfers of less than fair market value within this time.
If they find one, they give you a big fat eligibility penalty.
Here, even though Antoinette bought the house with her daughter for approximately $302,000 and her daughter paid $319,000 of Antoinette’s expenses, when Antoinette sold her portion for $80,000 the house was worth approximately $818,000. The Medicaid agency found this transfer of assets to be below market value and assessed that large penalty.
Don’t be like Antoinette. She thought she could beat the Medicaid system with a convoluted plan.
It didn’t work for her and it most likely is not going to work for you. No matter how clever you think you can be with multiple contracts and self-researched legal doctrines, you cannot beat the Health & Human Services Commission without an iron-clad case.
The HHSC has analyzed every application for nursing home benefits in Texas for decades. They’ve seen everything imaginable by people trying to protect assets from nursing homes.
Unless you worked for the HHSC, you probably haven’t seen enough to know what works and what doesn’t.
I have, and I can help you before it's too late.