In order to qualify for Medicaid to pay for a nursing home, you have to meet very strict income and asset limits. In other words, the government won't pay for your care unless you can't pay for it yourself. The one asset you are allowed to keep and still qualify for Medicaid is your home. This might lead you to believe that you will be able to leave your house to your heirs, even if you have nothing else to leave them. However, unless you are proactive about protecting your house for your heirs, the government will take that too. Through the Medicaid Estate Recovery Program (MERP), Medicaid reserves the right to recoup your long-term care costs by seizing any assets you leave behind.
Aging Advocacy Groups Think This Should Stop
According to a recent congressional advisory commission report, the Medicaid Estate Recovery Program only recoups a small percentage of total Medicaid spending. They estimate that the program only recovers about .55 percent of the long-term care costs it covers, but the effect it has on some families—particularly low-income families—can be devastating for generations to come. If the only asset you have to pass on to your children is your home, and that is seized when you die, you cannot help them build wealth. Several elder advocacy and legal groups are urging Congress to eliminate MERP for certain low-income families. However, unless they are successful, it is up to you to take steps to protect your home for future generations.
Texas Will Not Seize Assets in These Situations
In Texas, Medicaid will not seize assets in the following situations:
- Your spouse is still alive.
- You have a child under 21 years of age.
- You have a child of any age who is blind or permanently and totally disabled under Social Security requirements.
- The value of your estate is $10,000 or less.
- The amount of Medicaid costs is $3,000 or less.
- Your unmarried adult child has lived full-time in your home for at least one year before your death.
- The cost of selling the property is more than the property is worth.
In addition, Texas will consider granting hardship waivers to heirs who request it. Hardship waivers may be granted if the value of the homestead is less than $100,000 and the heir's income is below a certain level ($37,470 for an individual in 2019) or if the heirs would need financial help from the government if assets are seized from the estate.
What You Can Do to Protect Your Home
Every family is unique, and the solution for protecting your home from Medicaid Recovery will depend on your situation. In general, we do not recommend transferring property into your children's names while you are alive. This makes your assets vulnerable to your children's creditors and, if you make the transfer fewer than five years before needing Medicaid, it could disqualify you from getting benefits at all.
For many people, the best solution is a life estate, also known as a Lady Bird Deed. Through this kind of trust, you remove the home from your estate so that it cannot be seized by the state to recover Medicaid funds. The house remains yours while you are alive and transfers to the beneficiary immediately upon your death. This has the added bonus of avoiding Probate. Additionally, because the house is not transferred until your death, it does not count towards Medicaid's five-year look-back clause.
Call Ross & Shoalmire to Learn More
Our Medicaid Planning legal team is committed to helping families protect their wealth and their legacy for generations to come. If you have not taken steps to protect your assets from the Medicaid Estate Recovery Program, contact us today. Our team will create a plan that takes your specific goals into account and helps you provide for your heirs, even if you don't have a large estate to leave behind.