“Exceptions” for Homestead Transfers
There are instances, or exceptions, in which you may transfer your homestead to someone else without incurring a penalty—in other words, you may transfer your homestead without its value being counted toward your asset limit. These exceptions are similar to those conditions stated in our other articles which may be applied to avoid your homestead itself being counted toward your total asset limit.
In general, a homestead may be transferred for less than fair market value without causing a MA applicant to be ineligible for long-term care services if:
The homestead is transferred to the MA applicant’s spouse;
The homestead is transferred to the MA applicant’s child under the age of 21, or child of any age who is blind or permanently and totally disabled;
The homestead is transferred to the MA applicant’s sibling who has an equity interest in the home, and who was residing there for at least one year immediately prior to the date on which the MA applicant was admitted into the nursing home;
The homestead is transferred to a son or daughter (not a grandchild) residing in the home for at least two years immediately before the date on which the MA applicant was admitted to the facility, and the son or daughter provided care to the MA applicant that, as certified by the MA applicant’s attending physician, allowed the MA applicant to stay at home, rather than in a nursing facility;
The MA applicant demonstrates that he/she intended to dispose of the homestead at fair market value or other valuable consideration;
Denial of MA eligibility to the MA applicant would cause him/her undue hardship based upon imminent threat to his/her health and well-being.[i] (If this exception applies, then a cause of action exists against the individual(s) who received the property.)[ii]
If none of the above exceptions apply to your situation, a transfer of your homestead for less than fair market value within five years of your applying for MA may result in at least some period of ineligibility for MA benefits.
Will Medical Assistance pay the cost if you need to move into a long-term care facility? If so, will the State go after your home?
If it becomes necessary for you to enter a long-term care facility, such as a nursing home, it is very important that you are informed—preferably well before it becomes necessary to move into the facility—about how this coincides with your eligibility for receiving MA and its long-term effects. The danger is when people suddenly find themselves in a position in which they are required to move into a long-term care facility and as they understand it, MA will cover the costs of that facility without any lasting consequences to the estate.
It is important that you understand how the State will look at your assets if it is determined that the State has a claim against your estate for the value of the MA you received. If you are over age 55 and receiving MA, or if you are any age and have resided in a nursing home for at least six months and received MA, the State will try to recover the amount of MA paid on your behalf from your estate after you pass away.[iii] Generally, if you received MA and are married, after you pass away, the State’s claim to try and recover the amount paid on your behalf is not filed until after your spouse also passes.[iv] The State’s claim may be filed, but not collected upon, if you are survived by a child who is under the age of 21, or any age and is blind or permanently disabled.[v]
It is possible for a claim to be filed against your home and collected upon, if none of the following people are living in the home, or the home is sold or otherwise transferred:
A sibling who lived in the home with you for at least one year prior to your moving into a long-term care facility, and who has remained in the home since that date; or
An adult child or grandchild who lived in the home with you for at least two years prior to your admission into a long-term care facility and provided care that allowed you to remain in the home during those two years, and has remained in the home since that date.[vi]
If you were a MA recipient while you were living in a long-term care facility, the State may try and recover the amount of MA paid on your behalf by filing a lien against your home, which would be the amount of MA paid on your behalf.[vii] However, a lien will not be filed against your home in the following situations:
If you return from the long-term care facility to your home, or doctor states that you may return home within six months;
Your spouse resides in the home;
Your child who is under age 21 resides in the home;
You child who is blind or disabled resides in the home;
Your sibling resides in the home, and had resided there with you for at least one year prior to your move into the long-term care facility and your sibling owns a portion of the home;
Your child or grandchild resides in the home, and had resided there with you for at least two years prior to your move to the long-term care facility, and provided you with care that allowed you to remain in the home.
At the point that none of the above exceptions exist—for example, your spouse dies or no longer primarily resides in the home—then a lien may be filed against the home.
Consider the following illustration:
Bob is 75 years old and in overall good health. He and his wife, Mary, who is 73 years old, reside together and are completely capable of caring for themselves. Bob and Mary have one son, John, and one daughter, Lynn, to each of whom they intend to leave assets when they pass away. John is 45 and lives with his wife and two children. Lynn is 42 and lives with her husband and four children.
Bob and Mary own a cabin on a lake, which has been in the family for 25 years and is the site of countless family memories with their children and grandchildren.
Bob and Mary have discussed at length with John and Lynn to whom they desire to leave which pieces of their property. Ten years ago, Bob and Mary gifted their home to Lynn, who has been living there with her family ever since. Bob and Mary now live primarily at their cabin on the lake and intend to leave the cabin to John after they both pass away. Until then, the whole family, neighbors, and friends enjoy the cabin as a gathering place. John and Lynn are happy with this arrangement and played a large part in planning how the properties would be divided.
Bob and Mary believe that they have their affairs in order. However, without warning, Bob suffers a severe stroke, which leaves him with permanent paralysis and an inability to care for himself. Despite her sincere desire to do so, Mary is incapable of providing Bob with the care that he needs, and he is required to move into a nursing home with no possibility of returning to live at home.
While Mary is still alive and residing at the cabin, it is excluded from being considered in the State’s asset calculation to determine Bob’s eligibility for MA for long-term care services. The home that they gifted to Lynn ten years ago is also not included in the asset calculation because that gift occurred prior to the five-year “look back period.” In Bob and Mary’s case, without considering the cabin as an asset, Bob is eligible to receive MA for his long-term care services.
Bob lives in the nursing home receiving MA for five years and then passes away. Mary is able to continue living in the cabin; therefore, the State may not place a lien on it.
Mary passes away five years after Bob.
As noted above, it had been Bob and Mary’s intent to leave the cabin to John. However, there is now a claim against Bob and Mary’s estate to try and recover the MA costs expended on behalf of Bob. The estate is forced to sell the family cabin—which now means that Bob and Mary are unable to “pass it down” to John. Of course, John may purchase the cabin at fair market value in order to pay off the MA claim, but that defeats Bob and Mary’s intent of leaving their son with a gift as they had previously done with their daughter.
Sometimes the unexpected happens. The answer to the question of whether MA will pay the cost of a long-term care facility if it becomes necessary that you move into one is usually an answer that no one likes to hear, which is, “It depends.” The answer depends upon what you currently have and what you or your spouse recently transferred to someone else for less than fair market value. However, as illustrated in Bob and Mary’s story, even if MA covers the costs of your long-term care, it may greatly affect the plans you have for your assets and what you may want to leave for your children and grandchildren.
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[i] Minn. Stat. § 256B.0595, subd. 3(a); “The Perilous Path to Long-Term Care: It’s Not Really about Asset Protection,” Bench & Bar Minnesota, June 5, 2013, http://mnbenchbar.com/2013/06/the-perilous-path-to-long-term-care-its-not-really-about-asset-protection/, last visited October 17, 2014.
[ii] Information Brief, Research Department, Minnesota House of Representatives, Medical Assistance Treatment of Assets and Income for Persons Seeking Long-term Care Services, September 2014.
[iii] “The Perilous Path to Long-Term Care: It’s Not Really about Asset Protection,” Bench & Bar Minnesota, June 5, 2013, http://mnbenchbar.com/2013/06/the-perilous-path-to-long-term-care-its-not-really-about-asset-protection/, last visited October 17, 2014.
[iv] “The Perilous Path to Long-Term Care: It’s Not Really about Asset Protection,” Bench & Bar Minnesota, June 5, 2013, http://mnbenchbar.com/2013/06/the-perilous-path-to-long-term-care-its-not-really-about-asset-protection/, last visited October 17, 2014.
[v] Minn. Stat. § 256B.15, subd. 3?
[vi] Minnesota Department of Human Services, http://www.dhs.state.mn.us/main/idcplg?IdcService=GET_DYNAMIC_CONVERSION&RevisionSelectionMethod=LatestReleased&dDocName=id_006299, last visited October 24, 2014.
[vii] Minnesota Department of Human Services, http://www.dhs.state.mn.us/main/idcplg?IdcService=GET_DYNAMIC_CONVERSION&RevisionSelectionMethod=LatestReleased&dDocName=id_006299, last visited October 24, 2014.