Can Medicaid Take Mom's House to Pay the Nursing Home?

36 Comments

I frequently get asked the the question, "Can Medicaid take your house to pay the nursing home?"

As a general rule, a person's home is exempt and is not counted when he or she applies for Medicaid, so long as the equity value is under $552,000. If you are married and your spouse continues to live in the home, then the home is exempt regardless of its value. Also, several states with high property values have increased the single-person exemption to $828,000, so if you are single and your home is worth close to $552,000, you'll need to check your state's rules for Medicaid to see if this higher exemption amount applies to you. Finally, some states will require that the Medicaid applicant/homeowner indicate orally or in writing that they "intend to return" to their home should they ever become physically able to do so, regardless of how unlikely this may be. If the applicant is unable to understand or communicate this, then a family member can communicate this intention to the state Medicaid workers.

Note that although the house may be exempt at the time the owner applies for Medicaid, a few states will begin to count the house once six months have passed, if it is clear that the owner will never be able to return to the house based on a physician's examination and conclusion. However, this is the minority position, and in most states the house will continue to be exempt for the duration of the applicant's lifetime.

In all states, upon the death of the Medicaid recipient, the state will seek repayment of its Medicaid outlays that were made on behalf of the Medicaid recipient. So, for example, if Mom was in the nursing home for two years and the state was paying the nursing home $4,000/month for her care, then the state will file a claim against Mom's estate in the amount of $4,000 x 24 months = $96,000. If the house was still in Mom's name at her death, then in order to repay the state the $96,000, the house will have to be sold. Any amount of proceeds in excess of the $96,000 can then be distributed under Mom's will, e.g., typically to her children.

In summary, then, the general rule is that Mom's home will not be required to be sold to pay the nursing home--or the state government--while Mom is alive, but may be required to be sold to repay the state, upon Mom's death.

K. Gabriel Heiser is an attorney with over 25 years of experience in elder law and estate planning. He is the author of "How to Protect Your Family's Assets from Devastating Nursing Home Costs: Medicaid Secrets," an annually updated practical guide for the layperson.

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36 Comments

One maddening aspect of MERP is, since Medicaid is state specific, each state varies in it's approach to handling MERP. How each state does probate is IMHO a huge factor in MERP as I think it's thru probate that MERP's claim or lien is placed
for all states. I know it is for TX & NM.

In TX, the homestead can be exempt from MERP if:
spouse still living at home; family business based at/from the home; an unmarried adult child living at the home for a period of time prior to the death; selling the home would make whomever is living at the home go on the dole; other exemptions too. But you HAVE to file for the MERP exemption after death.

Also every cent you spent on the homestead (taxes, insurance, repairs, yard maintenance, etc) can be deducted from the MERP claim but you do have to file that with MERP within a set period of time - again dependent on each state's MERP rules. If the home still has a mortgage, this could be quite alot of money spent by family on the home.It is CRITICAL that you keep track of every $ spent as you will let MERP know you are filing a claim in probate for every penny

Say you have paid tax, insurance, repairs for 4 yrs @ 8K=32K. Medicaid paid NH, med’s, therapists, 70K for 4 yrs. Let's say the house is modest with a value is 90K which could net 81K maximum at sale.

You file your own claim in probate for 32K. MERP files 70K. There is 10K in burial/funeral costs. Probate has the funeral claim paid first and then your claim. The most MERP could get is 39K (81K – 10K- 32K) but only if you did a sale very, very quickly (fat chance in this real estate market) before a maintenance and taxes etc continue. MERP declines to do a claim as not cost effective. House is distributed as per will and mom's/gran's NH care was paid by the state 100%.

Some states have been aggressive with MERP. Other states - Alaska, GA, MI, LA,NM, TX - have done very little MERP. As more states face shortfalls, MERP should increase I would think.

MERP wasn’t well thought out. If states get super aggressive on it, then family will let momma's & gran's house go to rot as there will be no benefit for them to spend $ to maintain. Even if you want the house or live in the house, it is to your advantage to let it decline in value so you can get a low appraisal to enter in probate. If family walk away from homes because of MERP, just what are states going to do with a ton of old homes with old people stuff in them that likely has a decade ++ of delayed maintenance? MERP came about 2000-2002 when housing was all a go-go. Totally different real estate conditions now & for the near future.

Another aspect is how probate is done. Each state has it's own list of how claims against the estate are paid. My experience is funeral/burial & medical paid first(a class 1 claim) and then whatever you paid for maintenance of the estate (a class 2 claim) and then any mortgage (class 3 claim). MERP is way down the list as a class 7 claim. Credit card debt is even lower on the list as a class 8 claim. I've been executrix a couple of times and if you want to you (as executrix) can wait to enter probate and then you can run probate out to forever. I did this to work out all the family threats, in-fighting and nonsense with an aunt's estate. I would think you could do this to give you time to negotiate with MERP if need be.

But whatever the case, all these things are sticky and I am a firm believer in having an experienced attorney who is in the county where the homestead property is located to work with in probate.

My gut feeling is MERP doesn't persue claim unless they can recoup a clear and clean $150K+. MERP is done mainly by state contractors so estate w/an expense claim and lower value home is going to take too much time to be worth the time and paperwork needed to work a claim through probate.
My Mother, sister & myself were "joint tenants" on our Mother's home since 1979, after our Dad died. This was a "Life Estate" which our Dad had implemented to protect our assets, should anything happen to him. When Mom had to be admitted to a Nursing Home 3 yrs. ago, the DHS caseworker advised us to either sell the house, & split the money 3 ways, or one of us could purchase the home outright, & deposit 1/3 of the proceeds into Mother's acct. to be used as her "Spend-down allowance". So that's what we did. Now I'm reading up on "Life Estates" & wondering if we should have fought this a lot harder with a qualified atty.
Im6curious if anyone knows how coops are treated under MERP.