Medicaid, nursing home, house and mortgage? - AgingCare.com

Medicaid, nursing home, house and mortgage?

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I've been living with my dad, who has dementia, for 2 years now. He does reasonably well, but I've put my life on hold and he's a heavy smoker and it's all starting to take it's toll. I don't know that I'm ready to put him in a home yet as there are so many issues I need to sort through. He has no retirement and lives on his small SS income and a small pension. He would qualify for medicaid for a nursing home. I've done some research about his house and know that since I've been here for 2 years, he can either transfer the property to me or that I can continue to live here if he goes into a nursing home because my presence has kept him at home longer.

The house is mortgaged and he pays that out of his income. If he goes into a nursing home, can he continue to pay the mortgage out of his income or does the nursing home/medicaid get it all?

If he transfers the property to me (and I'm confused about this because I have POA so how does that work?), presumably I then take over the mortgage payments?

It seems as though everything I read assumes the elderly person in question owns their home outright, which is definitely not the case for a lot of people!

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PY - you won't be responsible for paying the mortgage. That is an agreement between dad & the mortgage holder. Now if you are his DPOA and the DPOA has it where you can do his financials, then it is likely going to fall to you to deal with the whatever's on the house. Please, please look at the DPOA to make sure that it allows you to do financials - like sell a home - on his behalf.

Sounds like house is low value (under 100K) rather than modest (100-200K),& you really don't want or need the house, if this is accurate here's my suggestions:
- you should sell the house before he applies for Medicaid for NH. Yeah it will be a total PIA to have to get rid of possibly decades of stuff but doing it now & before it is under duress is way better also you will be able to self-direct the proceeds from the house. So say Dad's house sells for 75K and the mortgage is 25 K, if Dad is not in a facility at the time of the sale, you as his DPOA can use the 50K left to spend down on things for dad like get his a prepaid no cash Value (NCV) funeral & burial policy (10K); buy new glasses & hearing aids (1 -3K); new easy to get on & off clothing; dental work($$$); a nice tricked out walker or wheelchair beyond the basic that Medicaid pays for. Medicaid does not pay for any dental (except for maybe accidents) so if Dad needs something done it falls to family to private pay for it & it will be very expensive. The 50K$ will be there to do a spend-down from the sale of the house,
- then if there is still $ left, dad could do a personal services contract between you & him to pay you for your services for managing the house sale or caregiving.You really do need an elder law attorney to draw this up for you as it needs to work for however Medicaid runs in your state. Also you get all Dad's legal all updated. Again you use the money from the sale of the house to pay for this.
- now you may want to think about doing the personal services contract now for dad to pay you now for your caregiving if he has the income left over after he pays the mortgage and the rest of the nut on the house. Again you have to do the math to see if this could work.

This can work IF you get a new place and Dad can move in with you for a bit till the house sells or if Dad could move into IL or an apt till it sells. It will be hard to sell a home with an elderly person living in it as they need to leave when it is being shown and it kept nice & tidy when it is on the market.

The real key to all this is going to be working with a Realtor that understands the limitations on dad's selling the property. Personally I would never go the for sale by owner route but with a Realtor. But there are things you kinda need to determine BEFORE you sign a listing with a Realtor. You need to find what the pay off is on the mortgage; what possible majors need to be dealt with (like roof, AC); other items that may have to be repaired /replaced to go to act of sale; then drive around the neighborhood and note who are the realtors who are actively working your dad's hood. those are the ones you contact and I would interview at least 3.

They should easily do a work-up on the house and the comparables within the last 90 days. You need to have a frank talk with them on how they do their biz (like how they view the DOM - days on market) & on the condition on the house and what you (dad) can & cannot do. You are paying for their expertise by the commission they get paid, so ask the Realtor ?'s. If the roof is bad and cannot pass inspection,and no $ for dad to replace then basically you have to reduce price and realize that limits who can qualify to buy the house (no FHA buyers). A good Realtor will tell you these things and how it affects the listing. Hopefully the mortgage pay off is low so there is $ left after all the costs to sell the house!

If you find that Dad is significantly underwater on the mortgage (house cannot ever even sell for what he owe's), then you need to think carefully on what to do. A lot of time, folks just walk away from mortgage in those situations.
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Thanks Igloo for the great advice and lengthy response - it is most appreciated! The house isn't worth much and, I think, the mortgaged amount is pretty close to what it's worth and I actually don't want the house. Long term, the cost of upkeep is going to be way more than any appreciation on the property.

I will probably buy another property before he goes into a nursing home so that I can move right out of here. I just don't want to be responsible for paying the mortgage if we list it for sale when he goes into a home - it looks like timing is everything! I'll look into the possibility of him being able to pay the mortgage if it is listed for sale.
Thanks again!
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PY - part 2…now some states allow for their monthly income to divert for a period of time if they have a home. For my mom's state, I was told this could be done ONLY if there was an active Realtor listing (no for sale by owner stuff) for a period of time. Usually 6 months. This is done so that you can do whatever to have the house sellable. But if you are not putting the house on the market, then all their income less the allowance is their SOC to the NH. So if you keep the house, then you need to be able to pay for whatever on the house for as long as mom is alive.

If you keep the house, it is kinda important that you do whatever you need to maintain the house but not do anything that would significantly increase the value of the home. So like "yes" on cutting the grass but "no" on putting in a tricked out sprinkler system or a pool. You want the assessor value to be a low as possible just in case you do have to go thorough with MERP. Understand?

Now each state has to have MERP done - Medicaid Estate Recovery Program. Their home is an exempt asset while they are alive but once they die it no longer is. In theory, assets need to be sold to reimburse the state for what they paid from Medicaid. Some states have a MERP evaluation done by cost / benefit analysis so a lower value home may not be worth the time and legal costs to purse the claim or lein.Other states have outsourced MERP to contractors who seem to view MERP as debt collectors. Realize that MERP is inherently a legal process as a claim r a lein on the property done via probate court and that has time & costs for all involved. Some states have it so that if the value is under a set figure (like 65K in a couple of states) then MERP isn't done. Some states have hardship exemptions. All states have exemptions to MERP. There is the caregiver exemption, like what you found out about. Now for the caregiver you may have to provide documentation that the caregiving you did was needed and that it kept mom out of the NH for 2 or 3 years. You may need to get a letter from mom's MD on this and you have to be able to show you were there to be able to provide the care, if they should ask for it. If you have a full time job, then it will be a stretch to get the exemption. There are other exemptions, like for expenses paid on the property if you do not live there. I & another family member pay for all on the house and upon mom''s death will file for all expenses paid as an exemption to the state's MERP claim as we live in another state. If you are living in the home, then you cannot do this exemption.

My mom also files an annual right to return to the house and she did an intent to return with her attorney when she did an update to her legal awhile back. Her wish is to go home & we are doing what we can to ensure her ability to do that. You really want to have mom do a document to show her intent to return home.

Personally I think if there is a mortgage and if it is significant, it may not be feasible to keep a home for possibly years & years if you do not realistically have the income to do this totally on your own. You know if your mom has to do any spend-down to get her assets down for Medicaid, you all would probably be best by using as much of that $ to pay down her mortgage and prepay for all that you can on the house. Like months of utilities or a full year of insurance or repairs/replacement of any of the majors on the house (roof, central heat & air, etc). All these are totally legit spend downs as they are for her property.

It's a tough decision & none of this is easy. Best of luck!
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DebraLee is spot on on the income off set for NH & the mortgage due on clause.

PY (love the name too) you really have a couple of different issues going on that dovetail each other…..My mom still has her home, is in a NH on Medicaid and this is what I've found. This will be long so get yourself an adult beverage!

Each state runs Medicaid under an overall federal guideline. So each state sets the $ ceiling on assets & income. It sounds like you have already explored that and mom is OK. You need to find out what the property value limit is. Most states have this @ 500K but make sure the mom's house is under the limit. You can use the tax assessor value for what the home is worth (tax bills usually go out in Oct or Nov for payment by end of January, so it should be around somewhere)

About the mortgage, she cannot just transfer it to you. The mortgage is a binding agreement between her & the mortgage company. Now the mortgage company doesn't give a rats butt who pays the mortgage, insurance, maintenance on the house, they just want to get paid till it is paid in full. So you can continue to pay the mortgage on mom's behalf. Once it is paid off, mom will get a "release of deed of trust" from the mortgage co. & mom will own home outright. If you do this, you should look into having an attorney draft an agreement on your "loan" to mom that is your paying the mortgage. Now I'm assuming this is a traditional mortgage, so she probably has just a few more years to pay it off - can you get the mortgage to see what the balance is and when it will get paid off? If this is a reverse mortgage, once she moves out the mortgage is due in full or the house has to be sold.

I would suggest you carefully figure what it costs for the "nut" on the house (mortgage, insurance, taxes, utilities, yard work, etc) and then look hard to see if you personally can pay all of this for the possible many years that mom could be in a facility. The reason being is that Medicaid requires them to do a co-pay or SOC (share of cost) to the NH. Now each state allows for them to have a personal needs allowance - which ranges from $ 30 - $ 90 - a month, which is designed to pay for hair salon cost, phone or cable in their room or clothing replacement costs.
My mom's is $ 60 a mo and really it isn't enough to pay for her hair, lotions, bath stuff extra's, clothing. My point is there will be NONE of mom's income to pay for anything on the house once she goes into a NH & on Medicaid. Many NH expect their allowance to be placed in a trust account for them @ the NH too - so you don't even have the allowance to use if you wanted too. If you are currently needing mom's income in order to make ends meet to pay the "nut", then it probably isn't easily feasible to keep the house.
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The one answer I do know for one of your questions is your father's income will be taken to offset the cost if medicaid pays for the nursing home care except for a small portion to cover personal expenses. Depending on your state it can be from $30 to $70 a month. I do not think a property can be transferred with an existing mortgage especially if it has a due-on-sale clause. It would cause the loan to become due immediately. The two years caring for your father may allow you to continue living in the house, but upon his death, the Medicaid Estate Recovery Act will be looking for reimbursement from his estate. I would highly recommend you see an Elder Attorney before you do anything.
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Thanks, but my understanding is that a caregiver child who has lived in the house for at least two years providing care eliminates the transfer penalty (see below, #4):

Transferring a Home
In most states, transferring your house to your children (or someone else) may lead to a Medicaid penalty period, which would make you ineligible for Medicaid for a period of time. There are circumstances in which it is legal to transfer a house, however, so consult an attorney before making any transfers. You may freely transfer your home to the following individuals without incurring a transfer penalty:

1. Your spouse
2. A child who is under age 21 or who is blind or disabled
Into a trust for the sole benefit of a disabled individual under age 65 (even if the trust is for the benefit of the Medicaid applicant, under certain circumstances)
3. A sibling who has lived in the home during the year preceding the applicant's institutionalization and who already holds an equity interest in the home
4. A "caretaker child," who is defined as a child of the applicant who lived in the house for at least two years prior to the applicant's institutionalization and who during that period provided care that allowed the applicant to avoid a nursing home stay.
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NO he cannot transfer the property to you. If he does, he has to receive the full market value $$$ to pay for his care. Let's say the house is worth $100,000. He puts it in your name. He applies for Medicaid within 5 years. Medicaid will say " We are not paying for the first $100,000 of his care in the NH". It's called a transfer penalty. ALL of his SS and pension has to go to the NH. As POA you cannot sign ANYTHING to yourself; that would be a conflict of interest.
Since you are a caregiver living in the home, Medicaid will allow you to stay there, but you will have to pay the mortgage and utilities on your own. When your father dies, the bank will call in the mortgage and Medicaid will demand the proceeds from the sale of the home. Once you pay both of them off, there is usually very little left.
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