The homes in which we live can carry great sentimental value. Beyond simply providing adequate shelter, they can have beautiful memories of a new wife being carried over the threshold…a child’s first steps…family game nights…backyard barbeques…or just lazy days with a good book. These happy associations with a home can pass down through generations.
As a result, it is not surprising that many people elect to transfer the ownership of their homes to their children or other family members. This is an amazing gesture that can bring decades of joy to your family (and lead to even more names to the hand-written growth chart you have on a wall!).
Unfortunately, it can also bring years of financial distress.
If you transfer ownership of your home to a loved one, and within 5 years (60 months) have to move into a nursing home for long-term care, you may lose some of your Medicaid benefits. The reasoning is that Medicaid will view your home as potential income to help pay for your nursing home care. Medicaid will say that if the home had been sold, rather than transferred, the income from the sale would have helped cover the nursing home costs.
A formula is used to determine the Medicare ineligibility period:
- The average monthly cost of a nursing home is determined.
- The current market value of the home is divided by the monthly cost of the nursing home to determine how many months of care could have been covered.
Your family will then be responsible for the cost of nursing home care during the Medicare ineligibility period. According to one source, the average cost of nursing homes in Colorado is $252 per day! Imagine the financial hardships that can ensue if your family was forced to pay this full amount for a loved one’s care.
While some parents transfer their homes to their children and have an unwritten agreement that the children will do the right thing and take care of the parents, once the deed is signed over to the children, the parents no longer have any legal right to the home. They are at the mercy of the children to do the right thing. If the children do not do the right thing, the parents can be left without their home and likely alienated from their children.
If your home holds no sentimental value, you may want to just sell the property. However, there are specific requirements that still must be met in order to qualify for Medicaid nursing home coverage. The proceeds from the home sale may make you financially ineligible.
There is a lot to learn about how to reduce the financial impact of your estate planning decisions. It is best to consult with a Denver estate lawyer to ensure you are making choices that are in the best interest of your own care and the future of your loved ones.
The team at Brown & Crona, LLC can help you navigate this complex process. Contact us today at (303) 339-3750 or send us a message online to learn more about how we can help.