Protecting Your House from Medicaid Estate Recovery

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After a Medicaid recipient dies, the state must attempt to recoup from his or her estate whatever benefits it paid for the recipient’s care. This is called “estate recovery.” For most Medicaid recipients, their house is the only asset available.

Life estates

For many people, setting up a “life estate” is the simplest and most appropriate alternative for protecting the home from estate recovery. A life estate is a form of joint ownership of property between two or more people. They each have an ownership interest in the property, but for different periods of time. The person holding the life estate possesses the property currently and for the rest of his or her life. The other owner has a current ownership interest but cannot take possession until the end of the life estate, which occurs at the death of the life estate holder.

Example: Jane gives a remainder interest in her house to her children, Robert and Mary, while retaining a life interest for herself. She carries this out through a simple deed. Thereafter, Jane, the life estate holder, has the right to live in the property or rent it out, collecting the rents for herself. On the other hand, she is responsible for the costs of maintenance and taxes on the property. In addition, the property cannot be sold to a third party without the cooperation of Robert and Mary, the remainder interest holders.

When Jane dies, the house will not go through probate, since at her death the ownership will pass automatically to the holders of the remainder interest, Robert and Mary. Although the property will not be included in Jane’s probate estate, it will be included in her taxable estate. The downside of this is that depending on the size of the estate and the state’s estate tax threshold, the property may be subject to estate taxation. The upside is that this can mean a significant reduction in the tax on capital gains when Robert and Mary sell the property because they will receive a “step up” in the property’s basis.

As with a transfer to a trust, the deed into a life estate can trigger a Medicaid ineligibility period of up to five years. To avoid a transfer penalty the individual purchasing the life estate must actually reside in the home for at least one year after the purchase.

Life estates are created simply by executing a deed conveying the remainder interest to another while retaining a life interest, as Jane did in this example. In many states, once the house passes to Robert and Mary, the state cannot recover against it for any Medicaid expenses Jane may have incurred.

Trusts

Another method of protecting the home from estate recovery is to transfer it to an irrevocable trust. Trusts provide more flexibility than life estates but are somewhat more complicated. Once the house is in the irrevocable trust, it cannot be taken out again. Although it can be sold, the proceeds must remain in the trust. This can protect more of the value of the house if it is sold. Further, if properly drafted, the later sale of the home while in this trust might allow the settlor, if he or she had met the residency requirements, to exclude up to $250,000 in taxable gain, an exclusion that would not be available if the owner had transferred the home outside of trust to a non-resident child or other third party before sale.

Contact me to find out what method will work best for you.

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Pressures Sores: Frequently Asked legal questions

 

Asking questions is important for any consultation. When it comes to pressure sores and bedsores it’s often helpful to read what others have asked via BedsoreHotline.com

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  • If the patient was at a hospital first and then a nursing home which do we sue?

    It always depends on individual and medical circumstances but the possibility exists that both are liable. Often an injury begins in a hospital, may not be reported and/or is overlooked or neglected on intake at the second facility where it may get worse or lead to infection and other medical issues.

  • Do I have a malpractice case?

    A case may be medical malpractice on behalf of a facility or doctor. There may be hospital negligence and nursing home liability as well. In unfortunate and sad circumstances it may be a wrongful death lawsuit, where a family member or loved one may have the right to recover losses. Our team of experts will help determine the best options for for your bedsore or pressure sore, decubitis ulcer lawsuit.

  • What if the patient is too ill to appear in court?

This is not an issue and often the case with bedsore victims. For bedsore and pressure sore lawsuits there’s a legal team that includes experienced bedsore litigators, and medical professionals that can testify based on patient medical records and treatment or lack of and improper treatment. As well as other expert witnesses that look into hospital procedures, policy  and practices and determine if any federal violations were evident or standards of procedure were not met. Medical records and pictures of wounds are used.

  • How much does it cost to sue?

    There is no fee to you unless we win. When we accept a case we put in the resources and hours of our bedsores legal team because we are confident of a successful outcome based on the facts of the case. If we take on your case it’s because we see huge upside financial potential for the victim or family of the victim. We work on contingency—no upfront fee or time billed to you. When you win we get an agreed upon portion of the award.

  • Will beginning a lawsuit get better care for the victim?

    Once a hospital or nursing home knows a bedsore lawsuit is possible, often the care and treatment of the patient improves. This is because now they know they are under scrutiny and may be even further liable legally if not giving the proper care and medical attention after the sores have been documented by family and bedsore lawyers. Additionally, our law firm will let you know the standards of care that is necessary for you or your loved one. We can even help guide you on the best way to discuss issues with the doctor or staff and get the desired results.

  • I want to sue – does it take long? Does my dad have to appear in court?

    Timing of a case varies. With expertise and experience and a hands-on approach we move swiftly. The size of our firm allows us to focus on cases so they don’t get lost in the shuffle. Unlike some other law firms, our legal team of attorneys, paralegals, research assistants, medical experts and more, have the experience and knowledge to avoid time lags. Many times cases are seåttled before even going to court. Of course, the plaintiff has a say in this decision and we do what is best for our client.

  •  Do I need money to sue-what does contingency mean?

    You will not need to lay out any money. We handle all of our bedsore and pressure sore negligence or malpractice cases on a contingency fee basis. That means that we only charge a legal fee if we are successful and recover money for you. Our fee is typically 33 1/3% of the net recovery after the costs and disbursements that we advance are deducted. The contingency fee may be even lower depending on the facts of the case and the reason the sores happened. With a free consultation, a bedsore law firm that advances all of the necessary costs, and a contingency fee arrangement, you get our reputable law firm with no out of pocket expenses.

  • How do I know if I have a good bedsore lawsuit? The nurse said the sores were caused by my father and existed?

    Don’t put much credence in the opinion of anyone that isn’t a legal expert. Even a medical professional or doctor doesn’t have the legal knowledge and they or facility administrator may even try to persuade you against a bedsore or pressure sore lawsuit. Such tactics aren’t new. Don’t be a victim twice. Consult with legal professionals when medical ones let you down. Then you can use your best judgement on how to proceed with your lawsuit.

  • What happens if my case loses-will i have any fees to pay?

    Absoultely not. We will not charge you one dime if we lose. No matter how much time or money we invest in your case we only get paid when we win. We do not accept every case offered to us. We use our expertise and team approach for cases of value to the victim and the firm.

 

Ask your own question here> bedsores@raphanlaw.com

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Medicaid Applicant’s Irrevocable Trust Is an Available Resource Because Trustee Can Make Distributions

medicare denial

An Alabama appeals court rules that a Medicaid applicant’s special needs trust is an available resource because the trustee had discretion to make payments under the trust. Alabama Medicaid Agency v. Hardy (Ala. Civ. App., No. 2140565, Jan. 29, 2016).

Denise Hardy inherited a one-half interest in a house and placed it in an irrevocable trust. The trust instrument stated that the trustee could distribute income to Ms. Hardy at the trustee’s discretion and that the trust was intended to be a special needs trust. Ms. Hardy entered a nursing home and applied for Medicaid. The state determined that the trust was an available resource.

Ms. Hardy appealed, and an administrative law judge agreed that the trust was an available resource. Ms. Hardy appealed to court, arguing that the trust was not available because it was irrevocable and could not be altered. The trial court reversed the state’s decision and ordered the state to pay Ms. Hardy benefits. The state appealed.

The Alabama Court of Civil Appeals reverses, holding the trust is an available resource. According to the court, a trust is an available resource if there is any circumstance under which payments can be made to the beneficiary, and that in this case, “if the house was sold and half of the proceeds of the sale were placed in the trust, the trustee could then make distributions as required by the terms of  [Ms.] Hardy’s trust.”

For the full text of this decision, go to: https://acis.alabama.gov/displaydocs.cfm?no=713449&event=4JX0KDU8D

8 Medicaid Planning Mistakes to Avoid: Click here

Additional Medicaid Planning questions? Click here

Regards,

Brian A. Raphan