How to Afford the Nursing Home Without Selling Your House

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By: Bill Henry
PublishedApr 30, 2020
6 minute read

Keep Your Home & Afford the Nursing Home

It costs about $9,000 a month to receive care in a nursing home. Most people cannot afford to pay for this kind of on-going expense out of their own pocket. So lots of folks turn to Medicaid for help. Unfortunately, many people end up selling their family home to qualify for Medicaid – when they could have kept it.

Elder law attorney Bill Henry helps clients get an aging or ill loved one into a nursing home while saving the family home.

Below is the full transcript of Bill’s video for your reference and convenience.

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How to Will Grandma Afford the Nursing Home?

So let me give you an example. Let’s say we’ve got grandma. She lives in Aurora, Colorado, and she needs to go into the nursing home. So she’s got a house. It’s worth $300,000 and let’s say she has $1,000 in her bank account. So she’s got to go into the nursing home, but we have a problem of course, because how is grandma going to afford the nursing home?

She only has $1,000 in her bank account. So what are her options?

Option One

Well, option one that money and we could use it to pay the nursing home. If the nursing home average cost is, let’s call it $10,000 a month, it’s normally between $8,000 and $10,000. So make my math easy. Let’s call it $10,000 a month. If we pay for the nursing home, we’re talking about 30 months or so, but now we have no asset left.

In other words, that house, the value of the house, had to be used entirely for the nursing home.

Option Two

So instead, we can look to the government and see if there’s any programs that the government has that will help us pay for the nursing home care costs. And there are.

So Medicaid program will pay whenever you have countable assets, if you’re single and going into a nursing home, less than $2,000.

So in our example, if the house is not countable, if we don’t have to count the house, then grandma will qualify because she only has $1,000 of assets in her bank account.

So the question is how do we get the house excluded so it’s not counted?

Well, let me give you the kind of the basic rules and then we’ll sort of get into some of the trickier stuff.

So the basic rules, there’s three of them.

First, the house, the total value, the equity in the house has to be less than $595,000.

Rule number two, the house has to be, in this case, grandma’s primary residence here in Colorado.

And then rule number three is that grandma has to have an intent to return back to that home at some point in the future.

So let’s take those three one at a time.

The Home Must Meet the Value Threshold

So the first one, $595,000 of equity. So grandma, in this case, her house is worth $300,000 so clearly that’s under $595,000 and she’s good to go. Even if grandma’s house was a million dollar house, well, if she had a $500,000 loan, she still would be okay because the equity in the house is less than $595,000. So she’s good for our rule number one.

The Primary Residence

Rule number two, it needs to be her primary residence and here in Colorado, and we’ll get into the exceptions to that. But for now, primary residence here in Colorado. Well it is. She lives in Colorado. That’s her house. That’s where she lives. So we’re good to go there.

Just One House

Now grandma cannot have two houses. So if she’s got her primary house in Aurora, Colorado, but she’s got a condo up in Breckenridge, even if that condo is only worth $100,000 that still is going to disqualify her because she’s got two homes. She’s only allowed one home.

Same thing would be true if she’s got the house in Florida, but then she has another house in, excuse me, a house in Colorado and then she has another house in Florida. Even if she splits her time equally, she only gets one house. But here we’re good to go. Grandma’s house is in Aurora and it’s less than $300,000.

The Question of Intent to Return Home

So finally grandma has to have an intent to return back to her house and this throws a lot of clients off. And they’ll say, “Hey Bill, grandma… We don’t expect grandma’s ever going to come back out of that nursing home.”

So therefore she would fail that test. But that’s not true because although she may not be expected to return home out of the nursing home, she could still have an intent to return home out of the nursing home. And so how do we prove that to the Medicaid office? What we do is we just say it in writing. Grandma says, “I intend to return to my house.”

If Grandma doesn’t have capacity, what do we do in that case?

Well, if she doesn’t have capacity, meaning she can’t sign the Medicaid application, let’s say she has dementia, then we have to rely on the power of attorney. So it’s really important of course to have powers of attorney in place for grandma in our example because otherwise who’s going to sign to her behalf? And things just get more complicated from there if there is no power of attorney.

But in our case you can see grandma qualifies, her house is excluded from being countable. She only has $1,000 in the bank account. Therefore, she will qualify for Medicaid, and therefore Medicaid would pay the nursing home care costs and the asset is preserved.

We can talk about things like a state recovery in another video. But let’s make this one a little more complicated.

Does Grandma Live Here or There?

Let’s say instead of grandma living in Colorado, let’s say she lives in Florida. So her house was in Florida, but then she starts to get ill, so she moved in with her daughter here in Colorado. And now daughter says, “Well, it’s time for grandma to go into a nursing home, but I want to keep her close to me so I can go in and visit her.” What about that scenario?

Much trickier because the first thing is if we follow our rules once again, house in Florida, maybe it’s worth less than $595,000 so we’re good to go there.

But then what about the primary residence? Well, if her primary residence is in Florida and she has an intent to return to that primary residence well now she’s no longer a Colorado resident, so she can’t apply for Colorado Medicaid. She’d have to apply for Florida Medicaid and clearly Florida Medicaid’s not going to pay for a nursing home in Colorado. It’d have to be in Florida.

So we have some issues there. It’s probably not going to work out. Now the only exception to that and remember is for example, is if she has a dependent that happens to live in the house in Florida. So what would it dependent be? It’s anyone listed as a dependent on grandma’s tax return. That’s who would qualify as a dependent.

So you could see if the house is not in Colorado, it gets very tricky, very quickly.

Houses & Trusts: It’s Complicated

All right. Another one that’s a little bit tricky as well, what if grandma’s house was in a trust? Or a house that’s back in Colorado, but now it’s in a trust, what happens in that case?

For most people, most trusts I see, they are what are called revocable trust meaning that grandma when she created this trust reserved the right to change it anytime she wanted. It is not an irrevocable trust.

Most likely if you have a trust, you have a revocable trust and you can look at the terms of that trust and you can tell if it’s revocable or not.

A revocable trust will not allow her to qualify for Medicaid. In other words, that house will be countable if it is in a trust.

So how do we fix it? How would you fix it if that’s the problem you’re facing? You would take the house out of the trust and into grandma’s individual name. Grandma, if she’s the trustee, would do that.

If grandma doesn’t have capacity, who’s the backup trustee? The successor trustee. They have the right to move that house back out of the trust and into grandma’s name. Now we can get her qualified again.

The Beneficiary’s Deed Conundrum

Another issue is if instead grandma doesn’t have it in a trust, but she executed what’s called a beneficiary’s deed. A beneficiary’s deed is a type of deed that just says that upon my death, this is where I want my house to go. We use it to avoid probate. You can think of a beneficiary’s deed just like a beneficiary designation on a 401k. It’s like the exact same thing. It’s just for real estate.

Well, beneficiary’s deed in Colorado will disqualify grandma from Medicaid, so we have to fix that issue as well.

How do we fix it? If that’s your problem, you revoke the beneficiary’s deed. If grandma has capacity, she knows what she’s doing, she understands what a deed is and what she’s doing in terms of the transfer. Then in that case, grandma herself can revoke the beneficiary’s deed.

If grandma doesn’t have capacity, now we have to look to the power of attorney. So whoever was named as the general durable power of attorney, the agent in the general durable power of attorney, they’re the ones that can revoke the beneficiary deed on grandma’s behalf.

I’m Bill Henry again with Robinson & Henry. Hope you found this useful. If you could share this video for me. Trying to get this information out there the best I can. A lot of confusion around this, but I can tell you for most people, almost always we don’t want to sell the house unless we’re doing that in the context of an overall plan. We don’t want to just go ahead and sell the house. It’s normally never the right result. If you have any questions, feel free to reach out to me anytime and I’ll talk to you next time.

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Our elder law attorneys know the ins and outs of this complex area of law. If you have a loved one who needs to go into the nursing home, but there is a desire to retain their home, Robinson & Henry can help.

Set up your meeting here, or call us at 303-688-0944. We now offer video case assessments!

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