Protecting The Family Home

Every family that owns a home has special feelings on being able to stay there if one of the spouses becomes sick and needs long term care, and also has a desire to pass it on to their children. Medicaid has special rules that apply to the home that do not apply to other assets. 

To begin, the home is an exempt asset under Medicaid law as long as one spouse is living in it. In a typical husband and wife situation, the rules allow transfer of the home from a spouse needing care to the healthy one at the last minute. In short, even though the 5 year lookback period will show the transfer, there is no penalty and the healthy spouse can keep the home.

Further, no lien will be put on the home. And if the healthy spouse decides to sell the home, that is allowed, and the sales proceeds can be kept. Connecticut does have a rule that says the healthy spouse cannot give away the home after the other spouse goes on Medicaid.

Another rule for the home is if a child has lived with a parent for two years, and during that time gave the parent care that was necessary to keep the parent out of a nursing home, the parent can transfer the house to the child and it will not count as a penalty transfer on a Medicaid application.

Since no lien is put on the property, it can be sold or mortgaged and the proceeds can be used by the healthy spouse to invest, or buy another home, or used to live on. If the healthy spouse does not have enough money to live on, a reverse mortgage could be taken out to provide the necessary income to pay living expenses. This is also true for a single person who needs Medicaid to pay for home care, but does not have enough income to pay for living expenses, such as taxes, insurance, utilities, food and all the normal everyday expenses.

It is always desirable to stay out of a nursing home, and to do that it is often necessary to make changes to make the home safe for someone with physical issues. That would be higher toilets, grab bars, walk in tubs, grab bars in the tub or sink, or moving laundry washer and dryer from the basement to another spot on the main living level. Ramps may be advisable. Almost any improvement to your home is an allowable expense. It not only makes the home safer, but if money must be spent down to qualify for Medicaid homecare, it is an allowable expense.

If one spouse is on Medicaid, it is imperative that the healthy spouse have a will in place in case the healthy spouse dies first. To be most effective, that will should have a trust inside it that can save a significant portion of, and possibly all the value of the house. It will also save most of the other assets owned by the healthy spouse. In the legal world, we call that a “no brainer”, so if one spouse is going on Medicaid a “Testamentary Trust Will” is almost always a must have.

One more method to fully protect the house, and other assets as well, is to put them into a special type of irrevocable trust so that it is out of your name, and is in the name of your trust.

There are pluses and minuses of this kind of trust, but after five years the entire home is protected, even if both spouses end up needing long term care. Those who plan ahead wisely can get the care they need to stay home and can pass on their home to their children.