My adult son does not live with my father (his grandfather), but is permanently disabled and lives with me (his mother) in a separate residence. Should my Dad need to go into a long term nursing home, and apply for medicaid, is it possible to have his house placed into a trust, naming his disabled grandson as the heir. Would medicaid still try to recover the house after my father's passing, if his disabled grandson inherited it in this way?
Is this a legal exemption to the NJ medicaid estate recovery program?

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You need to talk to a Medicaid experienced eldercare attorney. There is something called a special needs trust which can be used to exempt assets from mere when they are placed in an irrevocable trust for a disabled person. However, this must be done correctly, it is not a diy project. What would your disabled son do with a house? Would he be able to maintain it?
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sally - as others have said you need good legal on this. I would suggest you speak with ones that do disability & special needs trusts rather than elder law though. Focus needs to be on son first & foremost imho.

Dad kinda has 2 options: keep the house till death OR set up Special needs trust now - this really is best off with disability legal guy to do the SNT & a good firm will have an elder law attorney to consult with. But son's future is primary.

For the idea of dad keeping the house till death & then leaving the house to disabled grandson as per grandpa's will can likely work around the MERP / estate recovery process (exemptions for disabled heir) but there could be other issues with doing this for your son. MERP is no cakewalk but dad could do his will to leave to grandson and then grandson would need to file whatever MERP in your state requires to establish his hardship for heirship - and this is not a simple phone call either (at least based on what the letter & documentation/application I've seen is like) & grandson has to apply for hardship & do whatever is required by however your state does it's recovery program. PIA but do-able.

Or dad sell home & sets up an SNT now for grandson - this really really has to be done correctly by experienced legal.

But whichever path is done there are a couple of things to consider:
1. "deeming", so your income is a problem or the inherited property as an asset is a problem to keep son within disability income requirements.
2. "SOC" When grandpa goes onto NH Medicaid, he will have to pay all of his income as his "SOC" (share of cost) or co-pay to the NH. He will only be allowed a small personal needs allowance (varies by state, $60 is average), which will in no way pay for the upkeep on the home for the rest of grandpa's lifetime. Someone will need to pay for everything on the house (taxes, insurance, utilities, etc) from now till death. COuld be 6 months or 6 years. Can you afford to do this from now till forever? Inheirting a property is all dandy as long as you can afford it.

3. Mortgage - If he still has a mortgage, SNT on house not be possible till mortgage cancelled. If there is a mortgage(!!), can dad pay it off?

Now there are some pretty significant changes to disability assets for 2015, due to the ABLE ACT. Those that qualify can now place annually up to 14K in liquid assets outside of Medicaid income/asset guidelines. ABLE is going to be managed by the states, so likely certain banks are going to be where the funds have to be parked. The disability attorney should be able to figure out how to make this work for your son. I think they can have up to 100K in the ABLE excluded for assets - really for the disabled when young, ABLE is a huge positive for them to do.

None of these things are DIY projects, you need experienced legal. Good luck.
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Since he lives with me and the house is big enough to share, I could help with the expenses of maintaining the house and would also live there.
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Babalou is right, you need to ask this question to an Elder Law attorney, and it depends on your State rules and regulations for Medicaid [each State is different].

To be considered “disabled,” your son must meet Social Security disability criteria. If, however, your son also receives public benefits, consult with an attorney, since other rules may apply.
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