For many people, the family home represents more than just a financial asset. It holds years of memories and is still a place where multiple generations can gather.
For older couples, the family home is also one of their most significant assets and the centerpiece of their estate plan. And, like so many seniors, they worry about long-term care and losing their house to qualify for Medicaid.
Planning early matters
Medicaid planning can be complicated, particularly in a city where property values are high and long-term care stays are expensive, with an average annual cost of over $100,000. To be eligible for Medicaid, an individual can’t have more than $33,038 in assets.
Your primary home is typically considered to be an exempt asset when determining Medicaid eligibility, which means the value of your home isn’t a part of the asset limits. However, there are conditions tied to that exemption. The home must be your primary residence, and you must intend to return to it. If your spouse, a minor child or a child of any age who is blind or disabled lives in the house, it is automatically exempt.
Still, while the home may be exempt during your lifetime, it may be a different story for your heirs.
When a Medicaid recipient dies, the state may try to recover some of its costs through the Medicaid Estate Recovery Program. If the house is part of the estate at the time of death, New York may place a claim against it before it is transferred to heirs. Proceeds from the sale of the property would be used to repay the state. This can be a serious concern for families hoping to pass down the home to their children.
Several strategies can help reduce the risk of losing the home to estate recovery, such as transferring it into an irrevocable trust or directly to the children. Both strategies have risks, including Medicaid’s five-year lookback period.
You don’t want to wait until a health crisis occurs to begin Medicaid planning. By starting as soon as possible, you have more flexibility for securing access to long-term care benefits while protecting assets for your loved ones.