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My mother went into a nursing home as private pay while we applied for Medicaid. I am now told that the $3,000 life insurance policy she has to pay for her funeral disqualifies her for Texas Medicaid. Can she assign this policy to the funeral home and keep from having to reapply? Help!!!
If the property had remained in her name only as a homestead residence it would have been an exempt asset with respect to Medicaid qualification. At her demise, however, the value of the property would be subject to Texas Medicaid Estate Recovery.
What you needed to do was to create an "enhanced life estate" in the property for your grandmother (aka "Lady Bird Deed").
Here is how to fix it:
1. Quit claim the deed back to your grandmother solely.
2. Quit claim the home back to you but this time including language giving your grandmother an "enhanced life estate" in the property.
What the "enhanced life estate deed" does is essentially transfer the property to immediately but gives your grandmother, while she is alive, the right to do anything with property she would otherwise do if she owned it (live in it, rent it, sell it, burn it down, etc.).
At her demise the property will devise to you and, this is the key, will avoid probate and, therefore, Texas Medicaid Estate Recovery procedures.
I'm so happy I found this site and I thank all who post supportive feed back. We all need a hug.
Kind regards!
The goal is to transfer funds to a family member so the funds will be available to provide services above and beyond those provided by Medicaid without incurring a Medicaid eligibility transer penalty. Once the money is transferred to the adult care giver it is free and clear of Medicaid and may be used for any purpose desired by the adult-child employee.
This, of course, brings up the issue of whether this is a good idea to begin with or not. Transferring money to adult children is usually done with the best of intentions...and most adult children I have encountered do have their parent's best interest at heart. The problem is that this is not always the case and if the child decides to they may use the money on a 10 cruise instead of taking care of mom or dad. Moreover, things do happen that are out our control...divorce, accidents, etc. where funds could now be exposed to the claims of creditors. Therefore, when establishing these arrangements it may be helpful to place the funds received in a trust or to use an immediate annuity as the payment vehicle.
With respect to income taxes, yes, the recipient is obligated to pay ordinary income tax and FICA. The employer-parent is also responsible for FICA and FUTA. It is difficult to claim independent contractor status when providing services to only one indiviual.
Thank you.
Question: Is mom currently in a nursing home and you want to qualify her for Medicaid or are you planning ahead?
In either event, there are tools you can use that will allow the proceeds from the sale of the home to be used for her health, maintenance, and welfare and will not prevent her from eligibility or jeopardize benefits if currently being received.
These two are particularly effective in these circumstances:
1. A Supplemental Needs Trust
2. A Personal Care or Services Contract
If mom is currently in a nursing home and begins to receive Medicaid before the home is sold it is important the proceeds of the sale be divested in a manner that will not disqualify her from benefits in the SAME MONTH the proceeds are received. If not, the asset will be countable and she will lose benefits.