I am the POA/caregiver of my mom who has a medicaid form for nursing home pending. Her IRA+Taxable is $125k which is about the same as the mortgage. Since they will take her income can I use the portfolio to pay off the mortgage or will that cause a penalty?
Medicaid is an “at need” program run uniquely by each state which basically means they are impoverished usually with 2k in exempt assets and within whatever the monthly income limit for your state (tends to be abt $2100). If mom has 125k she’s WAY over asset maximum. If the house is high in assessor value, it may be over Medicaids property asset value as well, most states have this pegged at 500-550k.
Medicaid allows them to keep their within assessed limit home as an exempt asset for their lifetime. BUT due to Medicaid’s copayment rules, basically all their monthly income must be paid to the facility. Mom will have no-none-nada of her $ to ever pay any property costs. Mom can keep owning her house but you & other family will pay all of its costs.... insurance, taxes, utilities, maintenance, etc. To me it can make sense if heirs are likely to qualify for exemptions or exclusions to MERP Estate Recovery AND have the purse to pay all and a pretty deep sense of humor to deal with empty house for what could be years AND property is owned outright. Doing this on house with mortgage and the requirements needed by having a mortgage does not make sense to me. Using mom’s 125k to pay off mortgage - unless you can pay all on house from now till beyond death as you’ll likely need to go probate route - just does not make sense to me.
I’m more of the nuclear option on mortgaged property & Medicaid..... I’d let it foreclose and walk but instead taking the 125k to do a Medicaid compliant special needs trust after spending down $ on a fully prepaid funeral & burial and perhaps getting much needed dental work done. None of this is simple diy projects, mom needs an atty to guide getting paperwork done and then shepherding her Medicaid application.
Now if you live at the house and will be filing caregiver exemption & you know you’ll likely qualify then mom using her $ to pay off mortgage could be the move to make if you can totally pay all future property costs for an unlimited amount of time. If this is the plan, try to discuss with atty just how your state does the caregiver exemption. If at all possible to do it & get house transferred to your name while mom is alive, it’s going to be easier. Like some states have the caregiver such that you have to get a letter from mom’s old MD or SW as to care needed. Getting this years later after mom has been in a NH may not be easy to do.
Mom's home is an exempt asset while she is alive. There are probably benefits to keeping it mortgaged, since there will likely be a lien against the property upon mom's death. Her funds may be better used to private pay for care (this will get her onto a better NH in many areas) until her assets are below the Medicaid threshold.
SS - let us know what atty suggests as we all learn from each other. I’ve been under the impression that for caregiver exemption to work it needs to be that being her caregiver was your full time job & theres MD or SW documents to attest to care needed. If you have been paying ANY property costs be sure to bring that up at the atty meeting. There’s all sort of exemptions and exclusions to estate recovery as well as a cost benefit determination that can factor in as well. I’d ask point blank if the atty has done MERP (by state or outside contractor) and for what values of property and what % went through probate (so Recovery is a debtor or claim against the estate just like any other debts of the estate) OR if instead it was a negotiated settlement with Recovery. There was a post on this site awhile back where only child daughter did all without compensation and in addition worked low wage job & on her own could not afford property costs. Mom’s income was need to keep household afloat. Daughter felt she might be homeless if mom stayed in NH. She ended up having mom continue to live at the house, got a personal care contract done by atty so mom paid her a bit for caregiving, saved every extra cent. The Mom paid whatever extra she had forward on house costs. Her mom finally got quite ill a few months later and went into a facility onto Medicaid & passed away within a few months. Daughter was able to get the low income heir exemption to Recovery & got home transferred to her name. I think what often happens is you start helping out and it morphs into caregiving for free and you’ve lost 2,5,10 income producing years, spent some of your funds on mom’s needs, and now the $ that you need for your future isn’t there. It’s a frightening situation to be in. Do Whatever you can do to prevent that from happening.
Note that if your mom doesn't have a trust or some other mechanism then medicaid can take the house after she dies. So if you pay it off the mortgage they will get that money in the end anyways. So it might be better to just spend it now if you do indeed need to spend down. You really need to see a lawyer to see what your options are.