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"How to get Medi-Cal coverage for your nursing home care... without selling your home or leaving your family without a dime... Surprising ways to pay for your assisted living and long term care costs."

Elder Law Today Newsletter | Vol. 20 | August, 2007

 

Don't Sell the Home! And a Funny Story

Don’t Sell The Home!: We continue to receive calls from people who tell us they have been told that they must sell their homes in order to qualify for Medi-Cal. Nothing can be further from the truth.

Even under the Deficit Reduction Act which President Bush signed into legislation on February 8, 2006, the home remains exempt, or not counted for qualification under Medi-Cal. However, under the new federal law, a home with equity exceeding $500,000, or in the alternative, $750,000, is a countable asset. The states are required to choose one of these two values. California, to date, has not changed its rules regarding these values, but is expected to do so within the coming months.

By selling the home, you create liquid assets which will most likely put you “over assets” for Medi-Cal qualification. Remember that a couple can only have $101,000 in non-retirement accounts between them, and the ill spouse can only have $2,000 of the $101,000. In addition, upon sale, capital gains tax issues are created with the loss of “step-up in basis”. The “step up” occurs upon death of the owners. Also, the home remains exempt from qualification to this date, if the nursing home resident’s spouse, child under age 21, or blind or disabled child is living in the home.

Protection of the Home. Under the new federal regulations, methods for protection of the home from a state lien after the death of the nursing home resident are presently unclear.

At the present time however, in California, we can still protect the home from a Medi-Cal lien after the death of the ill spouse, and several methods are at our disposal, which must be implemented ahead of time. We can create transfers of the home between spouses or to the nursing home resident’s children, and reserve a life estate for the resident. We can also transfer the home to a grantor irrevocable trust. These methods remove the home from the estate of the nursing home resident under real estate law, but retain certain ownership rights to the resident, thus preserving preferable capital gains treatment upon death. We do not know if our state legislature will change these rules in the future.

A Funny Story: As a consequence of our practicing “elder law”, most of our clients are older. One of my clients, a 94 year old woman, has a sister who is 96. Every week day, the 94 year old drives the couple of blocks to her 96 year old sister’s home, so that they can watch General Hospital in the afternoon. They have been doing this for over 30 years. They also make popcorn, and each has a high-ball during the TV show!


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