How is Medicaid impacted once an asset is sold?

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My Mom is living in a nursing home in DE. She is currently on Medicaid. I have sold her home and we go to settlement the end of the month. When I signed the Medicaid application a lien was put on her home.

How do I keep her qualified. I have an appointment with a funeral home to create a pre-plan contract and want to pay for proceeds from the home. She currently has a life insurance that has no cash value and want to cancel that.

Can I gift any of the proceeds to the family?

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Thank you for responding. I had already done everything you mentioned. I think I am on track now..
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You close end of July, correct? Hope that is right as it may take you the next couple of weeks to settle all this so that closing happens as planned and Medicaid keeps your mom eligible. You need to do whatever is required so that closing actually happens so that there is not a huge & costly issue to the buyer.

1. - Do NOT even think about gifting any funds. None - zero - nada can go for anything but either towards your mom's reinbursement of what Medicaid has spent on her her &/or towards future care by Medicaid. Medicaid is a joint federal & state program by administered or managed by each state under their own rules. You need to contact the Medicaid caseworker either assigned to your mom or that is assigned to the NH to see just how your state program handles increases in asset for currently enrolled Medicaid recipients.

2. Wait on the funeral home as you need to clearly find out the approach that the state program takes. Some will require that once they are on Medicaid, that all the new assets be fully 100% used for their current care @ the NH so if that is the case, then there will be no $ from the house sale for anything other than NH (so NO $ to buy FH policy). Other states will have them to have to reimburse for all costs to date, do a spend down for the balance but get to stay on Medicaid (also no $ to use for FH). Other states will have them become ineligible for NH so that they revert to being private pay for the NH - if this is the case you need to find you just how much the NH expects as a deposit in addiction to the monthly charges. (BTW NH does NOT have to charge you the current state Medicaid rate either, there could be a much higher private pay rate. You will likely have to sign a contract for private pay too.) For this last way, there will be $ that you can just for FH as part of her spend down. You really need to clearly find out just what your mom's state requires to be done.

Please don't get cute with the $ either. Real property transactions are recorded to the penny by the tax assessor and dovetails into the state system. State will know to the penny just how much $$$ mom made on the house. Therefore Medicaid will know. You don't want to have to deal with a transfer penalty on any of this also. If you use any of the funds inappropriately, state can go to you personally on all this too as I bet you are her DPOA & signing all the paperwork on the listing and the act of sale. They won't come after mom but you on all this if it becomes an issue as you have not done the fiduciary duty required of a DPOA.

3. Real estate issues. Is the listing with a Realtor? If so, did you tell them that there is a Medicaid lien on the property. & if so, was it clearly indicated on the property report that a possible Medicaid lien or claim exists? (Property report will be a standard multi page form that states what the condition is on the roof, appliances, etc and there is a section to add in other items that will make a difference at closing like an mortgage exists) If so, then no worries if it runs past the closing date. But if not, buyer can walk on the contract & get back all their earnest $$ with out any penalty on the buyers part if closing doesn't happen due to the Medicaid lien issue. So if your Realtor is not aware of lien, I would call and send them a fax too, that this exists asap (like today too). They will need to let the title company know asap. The lien or claim will be an issue for title insurance and therefore good title to be issued. If the buyer is getting a mortgage, title insurance is almost always required. The Medicaid claim or lien will surface eventually and be a problem for the title to be issued or if issued then valid. Some title companies are now requiring for any property sales in which the seller is over 55 to sign off a document that no Medicaid claim or lien exists too. If there is one, you (as the seller) may have to purchase an separate indemnity policy before title issued. They aren't cheap & totally the sellers cost, but better to pay the title company for it than loosing the sale & having everybody very not happy.

For Medicaid recipients who have died and had a home, there is a specific program that deals with this - MERP (Medicaid Estate Recovery Program). Under MERP there is a form that has to be issued (for Texas this is the MERP Authorization and Certification Form July 2013 edition) before the home can be sold, transferred or divested. MERP is only after death process.

But for those still alive and selling the home, you need to get the specific details from Medicaid as to what is done for their eligibility & what to do with all the proceeds from the act of sale. Good luck.
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Forget pre-planning a funeral until you clear the lien with Medcaid. Let's say you close tomorrow. The closing will hit a snag because the lien is still outstanding. The buyer's lawyer and bank will not accept the property with a lien. The closing will be postponed until the your attorney has worked out a settlement figure with Medicaid. Medicaid will take the entire proceeds if the lien is big enough. If Medicaid only takes a portion of the proceeds, the remainder will become a cash asset that will interrupt Medicaid until it is spent down below $2000. Your attorney handling the closing should be informed about the lien. Lawyers hate surprises.
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No, you cannot gift the proceeds. The money needs to be used for your mother's care. There are some things you can do with the money, but you need to get legal and Medicaid advice to know how to proceed. The chances are that she may be taken off Medicaid until the proceeds from the sale of the house are used.
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