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she is really ill with cancer. She has moved into a nursing home, right now its thru medicare, but we are applying for Medicaid. I'm her only kin, what will medicaid do?

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How long ago was the gift made? If more than 5 years have passed then there will be no issue.

If less than 5 years have elapsed, and assuming she nor you have the funds to pay for her care, you will have to qualify her for Medicaid.
Here are two possibilities for dealing with the asset transfer:

1. Obtain a hardship exemption for the property. This may be effective particularly if it is now your homestead. Technically, the "look back penalty" is to be imposed for transfers made "in contemplation of applying for benefits" and that is not the case here.

2. Quit-claim deed the property back to her and have her deem it her homestead property making the asset exempt. Then title the property in the name of a revocable living trust or quit-claim back to you (your husband) via an Enhanced Life Estate Deed. Both will allow the property to pass probate free back to you (your husband). If her assets are subject to probate at her demise they will also be subject to Medicaid Estate Recovery. New York does not seek non-probate assets.
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There is something else I just considered. The penalty will be calculated from the date of the gift. So if the property was gifted 2-3 years ago, the penalty would be much less than if it was gifted yesterday. It may be that the penalty on 48K will not be much. If your mother needs Medicaid, it is a good time to apply. They will let you know if there is a penalty and how much it will be.
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I'm thinking you need another legal opinion. Look for "eldercare attorney" or "elder law attorney", and choose one with information about Medicaid on the web site. That's how I found a competent one who would have helped us negotiate things if my Mom had needed to go on Medicaid here in Arkansas. Our consultation was about $200.00 I think, some would have initial free consultation and then charge for drawing up papers, etc. We would have had some penalty for money of hers we spent on adapting a vehicle, but it would have been manageable as she had some Social Security income that could all have gone towards care in the meantime. Maybe the Medicaid specialist would recommend someone, but I would not be 100% sure you could trust that. I have a niece who is one who lives out on Long Island who I have every reason to believe is very competent. Medicare covers some hospice costs also, but it depends on a lot of things - with that life expectancy she could be hospice qualifed too. I was suprised that my mom's being on hospice actually was not helpful to her financially after a hospital stay when returning to skilled care; also, my parents' estate planners had them to put their house in a trust, but doing that in PA made it into a non-exempt asset, and I had to jump through hoops fast to get that deed changed. I actually got to know people in the PA Medicaid office who were helpful and supportive though, but you might not be able to count on that. The devil is in the details, which differ state to state and can change as the economy and budget situation does.

It is hard to go through all this, while you are also sad and grieving for your loved one, but there is usually not anyone else to do it all...I'm an only child, I and remember how tough it was to handle the different chores and documents while spending time with my parents, and working, and traveling...and trying to make the big decisions while dealing with my own emotions. It was all such unfamiliar territory to boot since I'm in pedatrics and knew next to nothing about Medicare, Medicaid, estate recovery, POA, any of it!
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Donac - you are getting conflicting legal. I'm going to second VStefans that you need another legal opinion and it needs to be an experienced elder law or estate attorney. If there is not one in your city, then drive to the closets big city to one. this is all just too important to let it just ride.

If the NH "Medicaid Specialist" told you that by deeding it back there would be no lien, that is totally wrong. Under Medicaid (which is what grannie will be or has applied for to pay for her continuing care in the NH) all of the Medicaid recipient exempt assets (like their home or car) is subject to MERP after they die. MERP is asset recovery after death through probate. When someone applies for Medicaid and still has their home, they acknowledge MERP somewhere in the stack of paperwork on NH admission.MERP isn't always done on a property - there are exemptions to MERP for caregivers, property costs, etc. MERP is not always done and seems to be based on the overall value of the property. So a low value property - like yours - usually isn't done. But could be. MERP is a legal process so the time & cost to go after a 48K property is kinda the same as a $ 248K one - and I know what i'd go after. But you never know.

By transferring the property to a non-family member (your darling boyfriend), makes the situation much harder as the view is that he - since he is not family - has no connection to grannie and therefore the property was a total gift. Gifting triggers a Medicaid transfer penalty. Now often what happens is that the person's who benefitted from the gifting can show impoverishment or other inability to pay or hardship, then the transfer penalty will be waived. But you & the attorney may have to build a case for hardship. For me, this is not a do-it-yourself project.

The new attorney may suggest that your BF does a quit claim deed back to grannie. But if there is a mortgage or other debt on the property, this could be sticky to do but a good attorney will know what is feasible for where you live. The QCD would make the property exempt asset for Medicaid and grannie gets Medicaid. Then there probably would be an agreement (private) between your BF and grannie regarding the debt (that you & he created) on the property. Personally, I would have her do a new will naming YOU as executor and you & your BF as the heirs. I'm sure your BF is a dear, but if all is in his name and your relationship changes, you could find yourself with zero and 20 years older. Good luck dear.
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Medicaid will consider the property a gift and will figure its fair market value. She will be penalized for the price of the property. So, say it is worth $100K. She will be expected to pay $100K herself before Medicaid will kick in. I am surprised she gifted the property to him, instead of to you. That leaves the two of you in a vulnerable position, since you are not married yet.
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Does she qualify for hospice?
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By the "two of you" I meant your mother and yourself.
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I would talk to a lawyer, not that Jessiebelle isn't right- I have no idea- but maybe a lawyer can help.
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Well me and my fiance have lived together for 12 years, the property is only worth 48K....its a sad situation since she was only trying to help us start a life. Now she can't live alone and I'm in no situation to take care of her :(
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The transfer of assets divisor will be set at the day that the property was gifted. This can either be very good or very bad. So say the transfer was Jan 13, 2010, and on that day the divisor was set at $ 100 a day, then the figure is worked back to that #. But if it was Jan, 2013, and the divisor is set at $ 143.00 a day, then it is worked back to that number. The divisor is whatever your state has as it reimbursement rate for the room & board costs for Medicaid. For states that do a high reimbursement rate (like NY state) a low value property, like 48K, will mean a super short transfer penalty period. While in a low rate state, (like TX @ 143.00 a day), a 48K penalty will be much, much longer. Understand?

Then add into that the assessors valuation set at the exact date of the gifting. The sticky part for some elders, is that property values skyrockted in the early 2000's, and they never challenged the assessment or had it lowered to a realistic value on the property. For most elderly, the property value doesn't matter because their taxes are fixed or reduced or don't even happen, so no real need to go down to assessor's office to have a reduction hearing. But can be a big costly problem in dealing with a transfer penalty later on.

Remember all real property changes are recorded locally and will dovetail with the overall state system. So for Medicaid, the transfer will come up eventually. If mom needs to be in a facility, then you really have no choice but to deal with the penalty. I'd be upfront on the application regarding this. Good luck and please post as to what happens.
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