Lee Edition

KEYS TO OWNING REAL PROPERTY IN MEDICAID PLANNING?

By Steven J. Gibbs, Esq.

KEYS TO OWNING REAL PROPERTY IN MEDICAID PLANNINGHello Friends & Colleagues!

Here at Health & Wellness, it is National High Blood Pressure Education Month, and one thing that can get your blood pressure up is the problem of owning real estate and planning for long term medical care costs.   So, if you or a loved one own real estate and are nearing the point that long term “skilled” nursing care may be necessary, what is the best course of action?  Questions such as “will I lose my home” or “will the nursing home take all my assets” are very common indeed.

Of course, many folks at this point in life have accumulated significant assets and a substantial portion may be real estate.

Do you need to liquidate all real property in order to qualify for Medicaid?  Is your primary home protected?  Is reserving a “life estate” or transferring assets to adult children a good option?

These questions are the focus of today’s article…

As a bit of background, Medicaid is a “need based” and “means tested” program that is intended as “payor of last resort” for those who are in dire need of long term skilled medical “nursing” care.  With that in mind, there are some common misunderstandings to address as follows.

1.  A Primary Residence Will Generally Not Be Defined As A Countable Asset For Medicaid Qualification Purposes Subject To Certain Conditions.

The general rule in Florida is that the primary residence will not be counted as an asset if there an intent by the Medicaid applicant and a reasonable probability of returning to live there.  Note, the probability doesn’t necessarily need to be good…just a reasonable and albeit hopeful expectation.

With that in mind, there is a big difference between an asset not being “countable” and an asset being protected from a lien to be attached for Medicaid recovery.  A nursing home care facility will sometimes suggest that a home is protected but neglect to inform the home owner that it may be subject to a Medicaid lien.  The only way to protect the home from the lien would be to transfer it to a “well spouse”.   Because the home is not countable, if a well spouse holds full title, it would be protected and not subject to liens for the ill spouse’s Medicaid repayment.

2.  Real Estate Assets That Are Not Deemed A “Primary Residence” May Still Be Deemed “Not Countable” If Income Property Producing A Reasonable Return On Investment.

Under the current Medicaid rules, assets that are producing an “income” are not typically also defined as an “asset”.  The idea behind the income/asset distinction, in my opinion, is that if the applicant is relying on the income, then the asset is not available for sale by the applicant and is not countable.  Thus, one way to hold real estate assets and still pursue Medicaid qualification is to rent out real property, at a reasonable market rate and backed by solid lease agreement that would pass muster under the Medicaid rules.  There are formulas to evaluate the ROIs and there are suggested lease terms to help ensure that this strategy would be effective.

3.  Strategies Such As Purchasing a Life Estate, Reserving a Life Estate, or Transferring Assets To Adult Children May Result In Penalties or Disqualification From Medicaid Benefits.

Any “transfer” of real property for “less than full market value” can result in a penalty under the Medicaid rules.   There was a time when a “life estate”, which is basically a “life interest” in real property was a good strategy for protecting assets in Medicaid.  An elderly person at that time could either purchase a life estate from a family member in an existing real property, thereby spending some “countable” liquid assets, or the  elderly person could convey real property and reserve a life estate for themselves…finding a way to protect the asset and render it not countable.  However, Medicaid has become more strict about life estates and only allows this strategy if the elderly person actually lives in the home, and thus we’re back to the primary residence exemption.

Another common approach is to transfer real property assets to adult children in the hope of thereafter qualifying for Medicaid.  As I’ve written in the past, there is a 60 month “look back” period in most states for transfers of less than Fair Market value and penalties can result from these transfers.  Also, transferring assets to children can be problematic for other reasons such as divorce and bankruptcy.

A couple of other thoughts about protecting real property are, if the property is for sale, Medicaid may elect to go ahead and qualify the individual rather than hold them hostage awaiting the sale provided the property is listed with a real estate broker and offered at Fair Market Value.  Fair market value is usually determined by licensed realtor, and any facts revealing deterioration of the real property can be helpful establishing why the value may be lower than average.

So, now you have some key insights about real property as it relates to the Medicaid rules.  Remember that this article does not focus on the income limits under Medicaid and this is another matter to consider.  All of this is a highly complex area, and every strategy should be carefully considered with your favorite expert elder law attorney.

As always, I hope this is helpful and… Until next time.

Steven Gibbs founded the Gibbs Law Office in January 2009, committed to providing client-centered legal services.
Steve as he would rather be called, is not your typical attorney.  If you appreciate the staunch egotistical mannerism of most firms, you will be delighted with Steve’s unpretentious approach to educating and then assisting his client.  Instead of giving you his complacent and lofty ideas, he would rather pursue your expectations with professional conversation about resolving your concerns under the Law.  It’s your life and it’s his job to make your legal expectations come true while using years of his guidance and knowledge.

Steve was admitted to the Minnesota Bar in 1999, the Florida Bar in 2007 and was recently admitted to the California bar. Keeping abreast of law changes in these three States, as well as the United States, assists him in all aspects of the types of law the firm practices.

Along his career path, he was an associate attorney for an insurance defense law firm; an in-house real estate negotiator for Target Corporation; and corporate counsel for Civix, LLC and Vice President for North American Properties where he was responsible for various real estate transactions, including legal issues and negotiating unresolved business issues.  Prior to opening Gibbs Law Office, PLLC, he was an associate with the firm of Roberts & Engvalson, P.A. where he gained his knowledge of trusts, estate planing and Wills.  He opened his own firm in 2008 and now focuses on laws that will enrich the needs of his clients throughout their lives and those of their children.  The firm has developed a practice dealing only with Trusts and Estate Planning, Wills, Medicaid Planning, Elder Law, Real Estate, Business Law and Probate.

Quoting from Steve “I decided to practice in areas that families will need as they progress down life’s path.  To help them with a solid foundation that will carry them throughout there lives is a rewarding experience for me and my staff.”

Gibbs Law Office, PLLC

8695 College Parkway #2330
Fort Myers, Florida 33919

Phone: 239-415-7495

Fax:  239-243-9029

Email: info@gibbslawfl.com

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