I lived with my mother in her house to help take care of her a short time before she had to go to a nursing home. I've continued to live there as I lost my house in a divorce. I want to keep the house as my residence, as it was my mother's home and my credit is too poor right now to go out and rent or buy. I'm over the 200% of poverty, so I can't claim hardship. Can I simply make payments to the State?
MERP doesn't seem to want a payment plan, they want the proceeds from a sale. NH costs run 5 - 12K a month, so the overall debt is about 90K a year and the average stay is 3 years, so that is over a quarter of a million $$ due. So they don't want 50 a month as it could never be paid and it's not set up as a revolving debt.
But before even thinking about probate, you need to see what mom's state has as it's MERP exemptions. You may qualify for 1 or more of the exemptions BUT - this is very important - you have to file for the exemption(s) within whatever your state has as it's MERP time frame. This is critical. I am all about finding out the nuances of MERP as my mom still has her house and is in a NH on Medicaid.
It seems that once they die, the state database co-ordinates with MERP. So that if they have real property, MERP will send the decedant's representative on file based on the Medicaid application a "notice of intent". So it is important that your contact info is correct in all things Medicaid. When you get the notice, you have to in writing let MERP know of any reasons why the MERP claim is not what they think it is. So this is why you have to file for exemption(s) in a timely manner, so that MERP can evaluate if they even will do an action and then if they decide to do an action, what the recovery amount is. Understand?
State law for probate is mucho importante! My mom is in TX and under TX law, MERP is a claim against the estate. Not a lien on property but a claim on the estate - quite a big butt difference. Now TX is a level of claim state for probate and claims against the estate are paid by their placement within the claim level groups. So in TX, MERP is a Class 7 claim, so everything that is from Class 1 - Class 6 must by law be paid first and foremost. Now administration of the estate by the executor, funeral and burial costs, mortgage or other property costs, health care costs for the last few months or years are all paid before as they are in higher levels of claim 1 - 6. Credit cards are a Class 8 claim in TX - so good luck on them ever getting paid. So in TX, MERP happens but is lower % of recovery than in a state in which runs as a equal claim state or one that allows for an actual lien to be placed on the property.
Now my mom's house is empty so all the expenses on the house (taxes, insurance, maintenance, etc) is paid for by myself or another family member. For property in which there is nobody living there, all the normal costs on the house are counted against the MERP tally. This is in TX law and is done so that the state does not end up with even more property that has just been abandoned or has tax liens, or mortgage issues. Most states have this in law but seems to only apply to empty homes. As all my mom's $- less $ 60 a mo - goes to the NH, family has to pay for all. When my mom dies, I will let MERP know with documentation, all the expenses we paid on the property. In turn, these will be vetted by MERP and the whole amount deducted from the MERP claim. So MERP has the time to decide whether or not to proceed with the claim. Remember, the executor controls how probate is done. In TX you have 4 years from death to even present letters of testamentary, and that is quite a bit of time in which MERP has to wait and then go to court to present their claim.
Some states have MERP done by state employees. But it seems states are moving to having an outside contractor do MERP. HMS does this for several states and they are very aggressive as they seem to act as debt collectors. TX has contracted with HMS and you can google Randy Drewitt's law firm in Beaumont to get an idea of how MERP is now running with HMS doing it in TX. I am going to post on this site my experience when MERP eventually happens.
Now some states have MERP thresholds - like MS has it set at either 65K or 75K and for homes at below that level of assessment, MERP doesn't even happen at all. Some states seem to have it set by policy but not law, at homes worth over 100K or 200K. Realize that if the family goes to probate, it will take about the same amount of MERP time to do a property worth 72K as one worth 372K, so they will likely focus on homes worth more money. That make total sense but it is the government, so who knows!
If your mom does not have a will, MERP will be very different because in most states, someone who dies without a will is considered "intestate" and usually all their property and assets default to ownership of the state and the family will have to go to court to prove linear heirship. You kinda really need an attorney to do this too. If this happens, MERP is really much more in control as MERP is an extension of state power. So you don't want this, you need for mom to have a valid will. If she doesn't, do one asap.
Alternatively, the house can be titled in the name of a Revocable Living Trust. Assets titled in the name of a Revocable Living Trust are not subject to probate in North Carolina and therefore not subject to Medicaid recovery.
Since from an ownership perspective (with respect to Medicaid eligibility) an asset owned by "The Mary Jones Revocable Living Trust" is the same as one owned by "Mary Jones" there is no issue with continued Medicaid coverage and "gifting" if the house is retitled in the name of a revocable trust. Your mom will still own the property and have full control of it just as she does under the current deed. You will be named as the trustee and the beneficiary of the trust.
The only issue that may come up is with respect to Homestead property tax exemption. It may be in North Carolina that a home titled in the name of a Revocable Trust may not be eligible for same. If the home does not qualify for exemption under the name of the trust if may cost you a few hundred dollars more per year in property taxes. It will be up to you to decide whether it is worth it or not.
If you have POA for mom you can probably do this without her involvement (if the POA has the correct language) and it should not be very expensive. You do not need a pricey elder law attorney, the guy or gal around the corner will suffice.
Most people do not have LTC insurance
(If the children of parents are trustworthy) putting the house into IRT Irrevocable Trust, AS A PREPLAN, and it passes the 5 year look back period; if children end up helping to pay for LTC before Medicaid, then some 'reimbusement' can be recieved from the house sale, or provide a legacy.
Folks also are mostly unaware that If NH is looming it is wise to use assets to purchase FUNERAL TRUSTS (must be done before applying), for Parents and even children, to qualify for the Spend down, instead of paying it all to a NH, Especially useful if Kids have been helping parents financially. Funeral trusts are generally MEDICAID EXEMPT. Note: if NOT purchased at a Funeral Home, they are transferable anywhere, and that way the Funeral home does not know in Advance about spending plans.
Also asset transfers can be made, again 5 year lookback: so such matters must be managed, and those funds cannot be put at risk or be subject to loss, or misspending.
If Kids are moderatley healthy; funds can be applied to single premium life polcies on themselves, (having return of premium option a must), again if kids later may have to use funds to support care, the $$ is there or if the kid passes, it provides extra dollars for parent care and family expenses.
it may provide a legacy. If the parent was wanting to leave an amount to Children as a CD, Using this method immediately increases the legacy in event of death of child.as opposed to a 'flat cd'
If the parent can be insured, the CHILD MUST BE the owner.
Gifting is not taxable unless we are talking Millions.
You'd have to explore this with legal, after gathering data about the various other options..
The USDA has a "Rural Direct" loan to buy property.
This helps those below income, perhaps poor credit, to buy their own place.
A property must be considered "rural" [outside a big-city limits, but may include small cities].
The payments are adjusted to your income, and reevaluated periodically to reflect whatever your income is.
IF there are special needs--disabilities, elder care in home, etc., that can play into the equation
There may be other programs for people in your situation.
These programs could allow you to purchase your Mom's house, and even get it fixed up/repaird/to Code.
Ask local realtors about something called "First Time Homebuyers Class". These are FREE. They only last a few hours. You can learn more about your options.
Attending that class can give you brownie points towards qualifying for certain types of loans.
Otherwise, because your Momis getting Medicaid, and she is already in a NH, there will most likely be a 5-year look-back to satisfy the system Mom has not "hidden her assets" or otherwise got rid of them in her name, to avoid paying the State.
Your buying the property from Mom, means you might also buy it for less than market value IF
===taking into account the reduced value of a home IF there are repairs necessary [foundations? roof? plumbing? electrical? Structural? ]
The State gets some money [there's no way they'd recup losses from the sale of most homes, anyway] , you'd keep the place, but it'd be yours.
No do-overs.
The only way to protect assets from State recovery, is if they have been disbursed or otherwise protected, long enough ahead of the person needing State care...I think that is 5 years, now.
IF mom had put you on her deed with her, you'd possibly still be faced with having to sell, to give the State Mom's half of the value.
Assets must be put into some legally recognized form, that allows the elder to retain control of their assets, yet, provide that they go to the specified heirs when they die. Without that, and even sometimes with them, a State can file a demand for repayment. Each State differs in their rules.
HOWEVER..
IF it can be demonstrated that removing an heir from the home, or otherwise 'attaching a lien' the home and/or business, or billing the family for the elder's care, would cause remaining family to become dependent on the State, States do NOT want that, and may back off.
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If Randizzle's parent is already in a NH and applied for Medicaid, the parent or Randizzle or someone signed off or acknowledged the MERP program and it's ramifications. In TX, you don't actually even have to sign off on this, it's done as an acknowledgement of policy. So any changes afterwards can mean a review of their acceptance in Medicaid. My mom has an annual Medicaid recertification and there are specific questions regarding property ownership and within that section is asked if there have been any trusts or other agreements done. I would imagine that a "YES" would mean that my mom would have her acceptance reviewed. That would be a total stress situation for all.
If you change ownership of the property - and if the trust is it's own legal entity and becomes the owner - then I would think the state could impose a transfer penalty for the whole value of the property based on value by tax assessor. As this can be viewed as an after-the-fact MERP avoidance tactic. The penalty could be a significant amount of $ depending on the house value.
I've dealt with a transfer penalty on my mom's car. It was no walk in the park, but with a car, it's not all that much $ all-in-all.Probably could have fought it as it was pretty far out in the 5 year lookback but it was easier to do it as having the value of the car reduced so the penalty was almost nothing so could be waived. But for a home, the assessed value can be a significant amount and not so simple.
Whatever the case, you really need to careful and find out how aggressive your state is on transfer penalty; how they view "after the application" changes; and how the individual NH that mom or dad is in handles the situation when Medicaid payment is suspended. Good luck.
The parent when transferring: an asset must NOT have any control over it
A trust for a house is Done as IRGT Irrevoccable gantor trust, IT retains 'step up in value' beneficial for taxes upon sale.
If one lives in the elders home caring for them for at least a year, I think there may be waiver in immediate estate recoveryConsult with the QUALIFIED Medicaid ATT in that state.
Being just 1 day or $1.00 over will usuallycause Medicaid Disq.
Medicaid fully expects all of her income - less her small personal needs allowance of $ 30 - 90 a month- to be paid to the NH. NH costs between 4K - 15K and if they are on Medicaid, they have to do a co-pay of all their other income. You or other family members if you want to keep the house, have to pay for whatever is needed to maintain the house. If you are living in the house, the state fully expects you to be paying for the costs on the home and none of what you spend on the home is an exemption from MERP (Medicaid estate recovery after death). If the house is vacant though, then what you pay on maintaining the home is an exemption.
If there is a mortgage, then it just may not be affordable for family to do this if your personal income is very low and limited. Or if the costs to maintain the house are just too much for family to do for the years and years that mom could be in a NH, then you all need to have a realistic discussion on either selling the house (which then the $ from the sale would take mom off of Medicaid as she now has assets above 2K) or rent it for a low enough amount to pay for the costs but keep mom under the income limit or you get a higher paying job to cover the costs or require that family living in the house pay their fair share.
If you have to sell the house or rent it, then all this centers on specific income and asset amounts, you really need someone like an elder law attorney with experience in your state on how to structure all this so that there is not a problem with Medicaid paying for your mom's NH stay.