Can my Mom use money for home improvements before she applies for Medicaid without penalty? The house is a life estate and I'm the remainderman. We have lived together for 14 months. I have recently taken PFL from my job to care for her after she came home from a short re-hab stay.
so Mom will move out of her already titled into Life Estate home & go into NH? Is this the plan??? I’m guessing it is, my answer based on this
Its her home, her $m so YES, she can pay for things for her home. But it may NOT be the best use of her $.
Please BEFORE mom spends $ on her home, find out from an lawyer w actual experience in Medicaid asset determination & MERP (estate recovery) as to exactly how her state views LE.
Here’s why, LTC Medicaid by & large allows for applicant to continue to keep home as exempt asset for their lifetime. Home can be titled in their name, or in an LE, or even have a mortgage, it’s ok….. BUT:
- Medicaid requires then to have basically almost all their mo income as a copay to NH. Once on LTC Medicaid mom will have no-nada-zero $ to pay on anything house. So LE property is on you & whomever else to pay all taxes, insurance, utilities, repairs etc. from day 1 of Medicaid application to 1-2 years beyond her death.
Avg NH stay is 2.5 years. Do you have the wallet for 3 + years?
- LE is not necessarily an exempt asset for MERP aka Medicaid estate recovery. Depends on property / real estate laws for her state. A lot of states allow for MERP to go forward on LE property because at time of the Medicaid application your mom had totally control over property. Mom is still the tenant owner. & Medicaid allows for lien placement onto any LE in some states. Others allow if LE not done over 5 yrs ago, so it is outside of recovery. Imo Mom needs a exact determination as to what path LE take in her state.
& take it w a grain of salt as states can change laws
- Medicaid has max value on homes allowed to be LTC eligible.
If mom has major work done, permits needed. & permits tend to state what the work done & value. & will dovetail into tax assessor/ collector database. Could increase value substantially & lead to being too high for Medicaid (over 500k value in some states). If over states max, mom ineligible for Medicaid
- Prop value may not matter now as moms taxes likely low or fixed. & she will need to keep that homestead exemption up even if in a NH. (You must Pay attention to homestead / primary residence stuff for her lifetime). But will matter big time should she need to sell it while she’s still alive & divvy out the % LE ownership (& taxes associated with your %) or she dies and you actually do get it via remainderman interest and all her elderly exemptions go away from her DOD on the property. Taxes could be tripled if not even more
Realize that Medicaid will want 5 yr lookback on her financials. That LE if done fairly recently is a red flag for the caseworker as it is a definite (although future) change to an asset of hers. Caseworker will be on the lookout for other signs of asset transfer. It’s all an equation that easy to do.
I’d suggest that you look in detail at all her bank statements back to 2015 to see is anything looks like gifting or there’s a pattern of payments that don’t seem to be tied to something that makes sense for an 80-90 yr old homeowner. & do this ahead of her ever filing. If you find something talk with the atty abt this as well as the LE. Good luck,
Your moms home and your moms $ are totally her assets.
Medicaid allows for your mom to move her assets into other types of assets as long as she remains the owner.
So mom can take her 100k & buy an annuity with the 100k. Annuity is in her name BUT has you as its primary beneficiary.
and
Mom can title her fully paid & owned home into a LE with her as the tenant/owner and you as it’s remainderman.
Medicaid allows for this. Both the LE & the annuity are both still her asset. HOWEVER Medicaid is going to want changes or attachments done to those assets in order for her to be eligible for LTC Medicaid.
On the annuity, mom will have to add the State/Medicaid to be primary beneficiary. You would become the secondary beneficiary and only after the State has been repaid all costs Medicaid paid will you get whatever left in that annuity.
On the LE, the State could do 3 things: require mom to add the State on as the remainderman and/or place a Tefra style lien on the property or refuse to allow a recent LE as a exempt asset transfer. Liens are the easiest. & Liens get placed all the time but are somewhat subterranean as not securized debt recorded as a mortgage would be. In the Medicaid application there will be a section on MERP and by applying for Medicaid you acknowledge that estate recovery exists and the state can do whatever needed to do the federally required attempt to recover costs. Title companies are pretty aware of Medicaid MERP. The lien will cloud the title change needed for you to get the house. LE as they pass outside of probate imo makes it actually harder to deal with MERP. The LE does not have the ability for you to place your own claims against the Estate for all those property costs you paid that a claim filed by you or other heirs that probate would allow for.
If y’all just did the LE and now now mom is spending to get a new roof $$ and renovate her kitchen & a bathroom $$$, all this will be in the lookback documents submitted for LTC Medicaid. The State is flat not going to just sit back and let a property, especially one upgraded and renovated, transfer to remainderman easily after she dies.
My suggestion if mom needs to spend down, is she could do dental work (rarely covered by MediCARE or Medicaid), buy new eyeglasses and hearing aids, buy a better quality wheelchair or Walker. Get a whole new easy to out on wardrobe that will hold up to heavy duty laundry care at a NH. Dental work could easily be the cost of a kitchen renovation.
If you know that you do not have the funds to front all moms property costs for an extended period of time once she goes in a NH & onto Medicaid, you might give serious thoughts on mom selling her home now. Get a real estate or tax atty to work on the documents as the % to each of you are very exacting on LE plus tax stuff. To me, LE not ever a DIY. Good luck.